Author: Bill Smead

Buffett and Munger Mark the End of An Era

At the Berkshire Hathaway Annual Meeting we marked what we believe is the end of an era both for Berkshire and for the S&P 500 Index. In Berkshire’s case, it is the loss of Charlie Munger and the passing of the baton from Warren Buffett to his well-prepared team. In the case of the index, it is the rhymes surrounding the past major peaks in stock market euphoria and what Munger and Buffett have said publicly. […]

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1968-1969: Buffett and Price Agreed

We’ve recently been making the case that the current circumstances in the stock market are most like the late 1960s and 1970s. Euphoric enthusiasm for the most aggressive stocks and an economic/national security spending explosion are held in common. However, the most interesting thing about 1968-1969 was the agreement about the stock market future between the greatest growth investor at that time, T. Rowe Price, and the greatest value investor of all time, Warren Buffett. […]

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Hit Them Where They Ain’t

[…] As value investors, we go into companies that are out of favor but have characteristics that could lead us to multi-year winners. Our best stocks were found in the holes in the other portfolio manager’s defenses. As we watched a .190 hitter, Kyle Schwarber, bat leadoff for the Phillies in the playoffs last year, purists like us yearn to see Rod Carew and Tony Gwynn again. Our stock picking discipline (our stock market sabermetrics) tells us that growth stock investing is too popular and is about to enter a “dead ball” era of stock performance.

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Saved by Zero

[…] The U.S. Federal Government has set a net zero carbon goal by 2050. Tremendous resources have been applied with borrowed money to fund these goals and subsidize money-losing green investments. After pouring money into green investments, investors are wisely fleeing the fantasies associated with the environmental movement’s agenda. Are we really more together? […]

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A Ticket to Purgatory

The Sherman Antitrust Act was created to stop our democratic republic from being ruined by “the concentration of capital in vast combinations.” The fear was that if too much of the success of industry went to too few people, our system would get disrupted.

The bad news is that the federal government has ignored the original purpose of the act. In our opinion, our society was first disrupted by the success of the FANG stocks and is now being disrupted by the Magnificent Seven. The good news is that the stock market has a history of solving problems on its own. What has happened over time to the largest and most popular stocks as measured by market capitalization? […]

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Drivers and Stock Pickers

In studies, 90% of drivers think they are above average. We believe that 100% of the people who pick stocks for a living think they will be above average. Is being above average a worthy goal and is the generation of alpha or excess return something to strive for? […]

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Stock Market-Interest Rate Rhymes

Warren Buffett regularly reminds his shareholders that interest rates are a gravitational pull to stock prices. History shows that the movement of stock prices and interest rates don’t necessarily happen simultaneously but play out over time. Where are we now in this continuum between long-term interest rates and stock prices? […]

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70/20/10 Rule Redux

A friend of our stock picking discipline reminded us of a very important force in the stock market. It was called the 70/20/10 rule, and it was promoted by Roger Edelman, Richard Evans and Gregory Kadlec in an early 2013 Financial Analysts Journal article. We had written about this in 2016, but today’s circumstances beg for a reminder. […]

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Long-Term Puzzle Pieces

[…] First, the S&P 500 Index is likely to produce very poor inflation-adjusted returns for the next 10 to 15 years. Second, we believe money can be made in the shares of companies which benefit from inflation like oil and gas stocks. Third, the most common question we get is, “When does the incredible run end for the 10 stocks that have made most of the returns in the last ten years?” Our answer is that it doesn’t make any difference to us when it happens, because we won’t own them now or when they get their reckoning.

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Stock Market Psychology

As bottom-up stop pickers and long-term investors, sentiment indicators don’t rank very high on our list of important considerations. However, there are times when extremes of sentiment occur and can have an impact on which stock sectors we avoid or ones we get attracted to researching. […]

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