Category: Missives

[…] History would argue that we have years of higher oil and gas prices ahead of us, especially if the Communist Chinese release their population from its COVID-19 imprisonment and start competing on the world economic stage. Therefore, we are making every effort to over-weight our oil and gas stocks despite their stock market success in 2021 and 2022. […] 

[…] What was going on in 2012 that made home builders so depressed about their future? What should you have done in 2012 with the shares of D.R. Horton (DHI) and Lennar (LEN) in response to the NAHB survey? What is going on now for home builders which makes them so uncertain and depressed about their future? Lastly, how should we as investors react to this sentiment? […] 

[…] As Buffet said in the 1998 Berkshire Hathaway meeting: The secret to life is weak competition. We shouldn’t complain about how tough it is and how few people are willing to do this. We should celebrate the wealth (alpha) we can capture from this backdrop. We should intensify our work not on which stocks can rerate the quickest, but which businesses that we own can compound our capital inside their business without needing outside investors. It would be great, too, if other minority investors alongside us don’t understand the value we see and are more than willing to sell their shares during the next buyback activities. This market is requiring investors to play for keeps. […]

The era of the dynamic sales growth tech company, with a religious quality to its leadership, appears to be over. Who are these mega-dynamic leaders? What was the key to their extended success in business and the stock market? How long will it be before these former powerhouse stocks get interesting again? In other words, when will Humpty-Dumpy get put back together again? […] 

If you were walking down the street and saw a $100 bill just sitting near the curb, would you pick it up? Academia would argue that the $100 bill isn’t there. If it were real, it would have already been picked up by someone else. It remains to be asked that should you be standing there over the crisp bill, would you take it? […]

[…] Newton’s First Law of Motion states that an object in motion tends to stay in motion unless an external force acts upon it.

In the year 2022, we have been reminded how efficiently the stock market facilitates moving money from impatient people to patient people. A bull market in stocks tends to stay in motion unless an external force acts upon it. In this case, the external force is the price of money. […] 

The investors of Smead Capital Management have been hearing us talk about ‘First World Problems’ recently. These are undoubtedly problems, but (in a manner of progress) are vastly different problems than we had before. Therefore, we feel we’ve solved the problems of the past and have opened ourselves up to new problems. This is like moving forward from pre-algebra to algebra in math. Our parents would be proud. […]

[…] What does this review of the “Sir John Templeton Way” tell us about the current bear market that we are sitting through?

First, shares purchased between now and the end of this bear market are likely to get rewarded in the future. Second, the shares we own today trade at very low multiples of earnings, book value, and free cash flow. It doesn’t matter in a market suffering indiscriminate selling, but it should matter a great deal over the next 5-10 years. […] 

Thanks to reading Spencer Jakab’s book, “The Revolution That Wasn’t”, we’ve been thinking about what it is like to be in a short position when overwhelming demand affects prices. The Strategic Petroleum Reserve (SPR) was created for our National Defense and/or a temporary crisis in oil production. So far, it was effectively used by President Biden to calm oil prices down when they hit $120 per barrel. The Reserve currently holds around 500 million barrels of oil, down from the normal 700 million barrels. […]

What has taken place in 2022 is nothing short of a man-made problem. The question is if you looked upriver, could this have been avoided? While it could be argued that Putin invading Ukraine was unexpected, the policy decisions and structure of the global energy markets have been shaped for years. It reads like the lamp in the movie A Christmas Story: Fragile. Besides structural issues, there have been pressures imposed on these structures that were unforeseen when they were built. These were exactly the pressures that caused what we now know as Chernobyl. […]