Author: Bill Smead

[…] We at Smead Capital Management have our faults, but we never “choose to forget” what has happened in past stock market cycles. For this reason, we are very over-weighted in energy and very under-weighted in the glam tech sectors which have totally dominated the first half of 2023 and the last 12 years in the stock market. “Memories may be beautiful and yet” we believe that forgetting what has happened in analogous situations is a ticket to stock market failure!

Charlie Munger says, “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at.” The stock market is always loaded with stocks you don’t own that produce spectacular returns. If you aren’t practicing a successful investing discipline, it is especially tempting to envy those who are benefiting from the latest euphoria. […]

One month ago, I was privileged to speak at the London Value Investor Conference (LVIC). Fortunately for us, Ben Inker, co-head of asset allocation at Grantham Mayo Van Otterloo (GMO), kicked off the session with a presentation arguing that deep value stocks were historically attractive relative to all forms of growth stocks, and very compelling versus quality value stocks. Imagine how pleased we were to have strong academic/empirical evidence for the argument we made in Omaha at the University of Nebraska-Omaha’s Value Investor Conference. Our talk argued that this is a Ben Graham (hunt for deep value) moment, not a Charlie Munger (pay up for wide moat quality) moment. […]

[…] We are very late in one of the greatest growth stock investing games in history. Technology, an investment sector with a few huge winners and mostly flame-out startups, has been on a roll dominated by the largest companies in the sector. These largest wide-moat monopoly stocks have feasted on nearly uninterrupted momentum. […]

Watching Warren Buffett and Charlie Munger Saturday in Omaha caused us to think about a very popular 1960s TV show called, “The Dating Game.” Hosted by Jim Lange, the game was played with the host on one side of a wall with a male or female contestant. On the other side were three people of the opposite sex and they were attempting to answer questions and get a date. The political pressure against oil drilling and exploration makes “dating” look very attractive to us in the oil industry! […]

[…] Charlie Munger said, “This is the biggest financial euphoria episode of my career [75 years] because of the totality of it.” It would only make sense that this episode would die harder than any other prior euphoria episode. And, for that reason, fear stock market failure.

We have been reminding everyone that we believe we are unwinding a financial euphoria episode that Charlie Munger called “the biggest of his career, because of the totality of it.” In the process of its unwinding, the sins committed during the euphoria episode will have a price to pay. Many investments got over-capitalized by nearly free money. […]

There were many good things to think about from Warren Buffett’s letter to shareholders which came out recently. In this piece, we’d like to drill down on two subjects that Buffett highlighted. […]

As a young stockbroker in the 1980s, I was very enamored with T. Boone Pickens. Pickens recognized the huge value that built up in common stocks in the inflationary 1970s and began to use the financial backing of the Junk Bond King, Michael Milken, to become an activist on Wall Street. His little company, Mesa Petroleum, started investing in undervalued large cap oil stocks and threatened to do large leveraged buyouts (LBOs) with the assistance of Milken’s firm, Drexel Burnham Lambert (my employer). […]

[…] Stock market history argues that the next bull market in stocks will emerge when all the sinful behaviors of the last financial euphoria have been cleansed from the system. It will be marked by stock market failure and there will be no urge to recreate the woogie-like euphoria of the prior period. We believe success in common stock investments will come from companies which benefit from persistent inflation and a relatively strong economy led by 92 million Americans aged 25-45 years old. Is it different this time?