Category: Missives

Entropy, which is a measure of disorder, is present in every aspect of our world. At a high level, it just means all things trend toward disorder.

Over the last twelve-plus years it’s been fascinating to watch the Federal Reserve struggle to defy the laws of nature through unconventional monetary policy and in the process, we believe, decrease the stability of the system. […]

We love the stock market, but there is one job in the industry we would never want to have. Most investment and mutual fund companies have a stock market strategist. This is the person who gathers statistics on the stock market, reviews the charts, tracks sentiment indicators, and attempts to guide investors on what might do well over the next six to twelve months. […]

[…] Mr. Market knows that low ROE produces low multiples and high ROE produces high multiples. He’s just very manic when he is jaded. We are seeking high-return businesses that are mispriced. By God’s grace, there are a lot of jaded investors and a lot of mispricing in this space. We’re sorry that Mr. Market is jaded. The right business managers can take us places. These companies are lonely now and (in comparison) we love it. We are sorry that investors are jaded.

[…] We at Smead Capital Management have our faults, but we never “choose to forget” what has happened in past stock market cycles. For this reason, we are very over-weighted in energy and very under-weighted in the glam tech sectors which have totally dominated the first half of 2023 and the last 12 years in the stock market. “Memories may be beautiful and yet” we believe that forgetting what has happened in analogous situations is a ticket to stock market failure!

Charlie Munger says, “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at.” The stock market is always loaded with stocks you don’t own that produce spectacular returns. If you aren’t practicing a successful investing discipline, it is especially tempting to envy those who are benefiting from the latest euphoria. […]

One month ago, I was privileged to speak at the London Value Investor Conference (LVIC). Fortunately for us, Ben Inker, co-head of asset allocation at Grantham Mayo Van Otterloo (GMO), kicked off the session with a presentation arguing that deep value stocks were historically attractive relative to all forms of growth stocks, and very compelling versus quality value stocks. Imagine how pleased we were to have strong academic/empirical evidence for the argument we made in Omaha at the University of Nebraska-Omaha’s Value Investor Conference. Our talk argued that this is a Ben Graham (hunt for deep value) moment, not a Charlie Munger (pay up for wide moat quality) moment. […]

In October 2008, Warren Buffett penned an op-ed in The New York Times titled, “Buy American. I am.” Warren argued that though things looked terrible, he was buying stocks personally. He was selling government bonds he held to buy these securities. He argued how poorly cash would do at that time and in the foreseeable future.

Fast forward to today when Berkshire Hathaway (BRK) sits on $130.62 billion in cash. It’s not deploying capital very quickly via Warren, Charlie Munger, Todd Combs and Ted Weschler to investments, let alone stocks. There is one thing that has burned a hole in Warren’s pocket though: OXY. […]

[…] We are very late in one of the greatest growth stock investing games in history. Technology, an investment sector with a few huge winners and mostly flame-out startups, has been on a roll dominated by the largest companies in the sector. These largest wide-moat monopoly stocks have feasted on nearly uninterrupted momentum. […]

My father and I both attended a small liberal arts college that was one of the strongest academic institutions in its region and was tough to get into. While it sat far away from the amenities of a large city and was historically weak in sports, it produced a lot of success out of its powerful educational rigor. It was also highly likely for you to marry someone you went to school with. The paradox that this marriage potential created at the college was that the odds are good, but the goods are odd. This is the statement that can be made for common stock investing today. […]

Watching Warren Buffett and Charlie Munger Saturday in Omaha caused us to think about a very popular 1960s TV show called, “The Dating Game.” Hosted by Jim Lange, the game was played with the host on one side of a wall with a male or female contestant. On the other side were three people of the opposite sex and they were attempting to answer questions and get a date. The political pressure against oil drilling and exploration makes “dating” look very attractive to us in the oil industry! […]