Author: Bill Smead

Virtual reality is not reality! We have just come through an era where virtual reality controlled stocks and bonds. For this reason, a series of unreal factors drove what we call the stock market metaverse. […]

After listening to the Berkshire Hathaway Annual Meeting on April 30, 2022, we thought it would be appropriate to frame the aggressive buying of Occidental Petroleum (OXY) and Chevron (CVX) in the first quarter of this year. Buffett and Munger bought around $27 billion of shares in these two companies at around $52 per share on Occidental and around $160 per share on Chevron. […]

[…] This leaves investors heavily committed (29.5% of the S&P 500 Index) to a narrow group of stocks dominated by tech darlings even as bombs are dropping on almost all other tech companies as a category. In other words, tech Generals are marching forward, and few troops are following. As history teaches us, the S&P 500 Index returns could well be prepared to produce “stock market failure” in the form of negative ten-year returns. As always, fear stock market failure.

[…] As a firm, we refrain from delving into politics and political debates. However, the climate change fundamentalists have put our body politic into an energy bind, exacerbated by Russia’s attack on Ukraine. They have moved oil from an economic discussion into a political football and are attempting to defy the laws of supply and demand. […]

Totally Addressable Markets (TAM) are at the heart of what Charlie Munger calls the biggest euphoria episode he has ever seen in his career. We believe that the coming stock market failure emanating from the over-pricing of the U.S. stock market is closely tied to TAM. What is a totally addressable market? When is it useful to think about TAM? Answering these questions could tell us a great deal about where to be invested in the common stock market over the next five years. […]

In our recent media engagements, we have been asked if the Russian invasion of Ukraine is the cause of the carnage in the stock market this year. Many of the investors suffering stock market failure and financial media participants are looking for some comfort from the declines. They’d like to think that their portfolios have been hit by a Molotov cocktail and that the stock market will repair itself like it did when the pandemic crushed stocks two years ago. The facts appear to say the invasion is only a catalyst for what was already going on. […]

We operate under the premise that alpha can be generated by stock selection, courage, concentration, and long-duration holding periods. In today’s missive, we will talk about long-duration holding periods through the lens of our current concentrated position in the oil industry. […]

We were watching CNBC recently and an analyst mentioned what practically nobody besides us has said. She called Amazon’s (AMZN) entry into the grocery business a “failed experiment.” Amazon has been very successful with its Prime subscription model in other areas. Why do experiments usually fail, even among companies which have made other experiments succeed? As the stock market grieves the mass destruction of capital in the early stages of the tech/growth bear market, let’s delve into this very important subject. […]

[…] This brings us to Chevron CEO, Mike Wirth. So far, he has neither joined with the European oil producers, who have drunk the ESG Kool Aid. Nor has he led the company to take full advantage of the stock market circumstances/low interest rates and followed up on what he believed was a “perfect fit” nearly three years ago. He needs to figure out what Chevron is going to be. Will he be like the European major oil producers or will he seek to be an oilocrat like Harold Hamm? […]

Most professionals who employ our strategy are wide-asset allocators. We fill a sleeve in the U.S. stock ownership category and for most, that is in the large-cap space. We compete with other value funds and ETFs, which represent themselves as value strategies. Using the James 1:27 test, how do we stack up at the beginning of 2022 with other value strategies and large-cap managers that are portrayed as value managers? […]