Author: Smead Capital Management

At the age of 35, I’m almost thirteen years into my career in the investment business. I was lucky to get a job right out of college in the brokerage business before joining Smead Capital Management at our formation. For most millennials like myself the last ten years have formed what we believe the business to be: a bull market reinvigorated by the whims of the Federal Reserve Board. If anchoring is a powerful force in investor behavior, the anchor at the depths of our millennial beliefs is that value hasn’t worked. We’d like to contextualize value stocks underperforming to frame whether this is a fundamental problem or if other factors outside of value are deluging the underperformance.

A series of important factors in the U.S. stock market are in play which beg the question, “Are we at a beginning of a risk cycle or at an ending?” The answers will have a bearing on what to own and where to be positioned going forward. These thoughts won’t be exhaustive, but we hope to get you thinking on a few important subjects.

As we watched this year’s Berkshire Hathaway Annual Meeting, one thing struck us. There was sheer enthusiasm around the annual shareholder meeting for anything tech-oriented. Yes, it was disclosed that Berkshire had taken a position in Amazon that Friday, but it goes deeper.

Many are wondering why the market for Initial Public Offerings (IPOs) has performed so poorly, even though the flood of hot new ones came to market recently. It took three years to choke demand for money-losing dot-com IPO companies back in 1997, even though Federal Reserve Chairman Alan Greenspan called the mania for tech stocks in late 1996 an “irrational exuberance.” What has killed the goose which traditionally laid the golden eggs on Wall Street?