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Author: Smead Capital Management

Smooth Returns

Harry Markopolos was working for a hedge fund of funds and attempting to put a portfolio together that would “smooth” long-term returns. In the process of marketing what his company was doing, he ran into a client who already had a money manager doing that for him. The money manager the client used was Bernie Madoff. When Markopolous looked at the long-term track record of Madoff’s client, he instantly knew that it was mathematically impossible to have a return that high with as little year-to-year variance in the return. We at Smead Capital Management would like to ask a few questions. How do you legally “smooth” investment returns? What price do you pay to “smooth” returns? Why do we as long-duration common stock owners not care about “smooth” returns?

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March 5, 2013

Losing the Bid

Many times in my 32-year career people ask me to comment on whether an established trend for a popular investment will stay intact. The most recent example was last year (2012) when our firm was asked on numerous occasions to comment on the stock of Apple. My answer is always the same. We don’t know when the hot streak will end for the popular investment and we don’t feel comfortable with popular securities.

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February 26, 2013

Our Job: Whether; Market’s Job: When

Warren Buffett describes the stock market’s purpose as being “a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”. We are reminded of this by a series of news reports and commentaries on subjects greatly influenced by basic economics. In today’s missive, we consider what the law of supply and demand says about China, oil, and housing in the USA.

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February 12, 2013

Too Active, Too Passive: Too Little Understanding

The wealth management and institutional consulting communities have allowed indexing to be called “passive” investing and stock-picking disciplines to be called “active” management. This implies a mindless approach to indexing and a great deal of busyness to stock picking. A number of recent articles and commentaries have been written which question the viability of stock-picking disciplines in an era of numerous indexing choices and ETF vehicles. We at Smead Capital Management believe these labels are at the heart of a great deal of confusion about what works and what doesn’t work in both equity mutual funds and separately managed accounts.

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February 5, 2013

Bloomberg: Bill Smead discusses Merck (1-31-2013)

Merck Says 2013 Profit Will Decline as Generics Cut Results By Shannon Pettypiece For more information go to www.bloomberg.com. The information contained in this article represents SCM’s opinions, and should not be construed as personalized or individualized investment advice. Past performance is no guarantee of

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February 4, 2013

Reuters: Bill Smead discusses Pharma earnings (1/29/2013)

Pfizer, Lilly beat Street; generics take toll By Bill Berkrot & Ransdell Pierson Reuters For more information go to wwwww.chicagotribune.com. The information contained in this article represents SCM’s opinions, and should not be construed as personalized or individualized investment advice. Past performance is no guarantee

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January 30, 2013
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