Author: Bill Smead

Yogi Berra was a beloved, successful baseball athlete, manager, and cultural celebrity. An entire book was written about his verbal amorphisms. One of my favorites was when he said, “It’s déjà vu all over again!” For us as investors, we can say that this is déjà vu all over again as we practice our stock picking discipline. […]

How does the euphoria for stocks in the days after the 1980 election contrast with today’s Trump election euphoria? What were the fundamentals of the 1980 stock market compared to today’s fundamentals? What interest rates were paid to borrowers of money? We will make the case for very useful contrarianism in the aftermath of the current stock market euphoria. […]

Dow Jones (publisher of “The Wall Street Journal”) announced that Nvidia (NVDA) will replace Intel (INTC) in the Dow Jones Industrial Average. Intel was brought in to replace Union Carbide four months and nine days before the peak in Intel’s stock price. Union Carbide became Dow Chemical via merger. The shares of Intel are down markedly over nearly 25 years in price and provided a total return of 3.2%. Dow and its components gave a 326% total return over those same years. […]

Two major labor unions, the Dock Workers Union and the Boeing Machinists Union, have attempted to reach an agreement with their employers on a contract. The dock workers agreement proposes an average 8.5% per year wage increase over six years, and the Boeing Machinists Union’s proposal is for an average 7.5% wage increase over four years. The dock workers will get paid 62% more in six years than today, and, if ratified by their members, the machinists will get 35% more in four years. […]

[…] Our solution to these circumstances is running a concentrated portfolio of stocks that could be attractive to investors for reasons separate from the movement of the stock market itself. Oil and gas shares are offering an addictive legal drug and should do well in an inflationary environment where interest rates return equity risk premiums to normalized levels. Value has been relatively cheap for too long because there has been no reason to trust value for an extended period of time. Stocks like Target (TGT) and Merck (MRK) could do well from demographic sweet spots. U-Haul (UHAL) and home builders could benefit from the urge of 180 million people below 40 years of age to be “free to move about the country” to find affordable places to live. […]

We learned a long time ago that we wanted to know what smart professional investors were doing. It’s always better to know who is smart rather than being smart yourself. Therefore, we’ve constantly kept track of insider buying, what great investors like Warren Buffett and Carlos Slim were doing, and what the most successful hedge funds were up to. A recent chart stopped us in our tracks. […]

[…] Our large-cap value strategy is not the “same as it ever was,” but it looks very attractive relative to the stock-picking disciplines we compete against. We own a portfolio that is cheaper on traditional value metrics in price than the S&P 500 Index (as cheap relatively as almost any point since inception) and most value portfolios. And we show relatively stronger balance sheets and return on equity than most of our competitors. This shows “How do we work this?” We really are very similar by metrics to where we’ve always been. We feel like we have a “large automobile,” a “beautiful house,” and a “beautiful wife.” […]

One of the very popular technology companies in recent years has been CrowdStrike, Inc. It provides cybersecurity to numerous major technology companies including the top Artificial Intelligence (AI) players. Its shares got blasted recently as the first big correction in the glamour tech stocks has taken hold of the market’s agenda. However, a much bigger issue in the stock market would be if the crowd of people who have come into the stock market since 1989 went on a buyer’s strike. […]

In a recent The Wall Street Journal article, Jason Zweig correctly pointed out that 85% of active stock-picking funds and ETFs had underperformed their benchmark. In many ways, his thesis could be called “The Death of Stock Picking!” Since Jason and most of the financial community have built their investments around owning the S&P 500 Index at the core of their portfolio, investors have feasted on record-setting returns since the stock market bottomed in 2009. Fortunately for stock owners like us, dogs chase cars and people chase stocks! Jack Bogle is taking a victory lap in heaven for the success of his investment strategy. […]

We are contrarians and oddly crave the moments when history, psychology and mathematics get defied in the U.S. stock market. We believe this is one of those points in time. […]