Author: Smead Capital Management

We at Smead Capital Management have been discussing some of the follies common to human nature and what we see as some pervasive trends in the investing world. These conversations got us imagining what C.S. Lewis’s, The Screwtape Letters, might sound like if they were applied to today’s investment environment. The satirical letters are written by an advice-giving bureaucrat in Hell named Screwtape, to his nephew Wormwood, a young demon who is learning how to lead humans astray. Taking some liberty with Lewis’s work, we present what we believe Screwtape might say if he were trying to advise Wormwood on how to lead investors astray.

At Smead Capital Management, we have our own Efficient Market Theory. Ben Graham observed and Warren Buffett repeated, “The stock market has a very efficient way of transferring wealth from the impatient to the patient.” We would add that over ten to twenty years the stock market moves money “efficiently from the those who over-think the stock market to those who don’t.” In this missive we will explain why we believe the patient benefit at the expense of the impatient and why those who over-think the stock market are incredibly inefficient and move their money to those with less complicated views on finance.

Many years ago, United Airlines had the slogan, “Fly the Friendly Skies.” At Smead Capital Management, we like to own companies for a long time which are “friendly” to their public shareholders. In this missive, we will define what it means in our eyes to be shareholder friendly and give a company specific example of this friendliness.