Author: Bill Smead

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. […]

We have gained a number of new investors and get regular vetting interest from investors who need to understand the roots of our stock-picking discipline. Our stock-picking discipline is built around our eight criteria for stock selection […]

[…] What Bill called “everyone thinking alike” we call a well-known fact. A well-known fact is a body of economic information that is not only known by all market participants but has been acted on by nearly everyone who participates in that market. In effect, you must bet against well-known facts to succeed in the long run in the stock market! […]

Back in 1993, a brilliant satirist by the name of Ivan Reitman produced a movie called “Dave.” It was the story of a life-threatening stroke besetting the President of the United States of America. His handlers, not wanting to shake up the country, hid his critical condition by making him a hospital bed below the White House. They then scoured the country looking for a doppelgänger to stand in for the President during his recovery. They found the owner of a temp agency in Boston, played by Kevin Kline, whose name was Dave. […]

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. […]

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. […]

[…] 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.

[…] 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? […]

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? […]

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? […]