Category: Quarterly Newsletters

When you have a significant underperformance period, investors have a good reason for wondering if you’ve lost your investing mojo. Among respected value managers, there is nobody more respected than the Oracle of Omaha, Warren Buffett. Has he ever been doubted during his career? What were the circumstances associated with his most significant underperformance episode? Lastly, what was the outcome of his most miserable underperformance stretch? […]

[…] Rather than study dead poets, we study history’s successful investors. We seek to learn from their style, much like you study the prose of a writer or artist. You are learning to learn and seek opportunities because while we can’t predict the future, the outcomes of the past can help frame and ground us. […]

[…] Warren Buffett once said that the stock market was formed to move money from those who are impatient to those who are patient. We look ahead in these businesses because the capital structures are not in a near-term crisis. We believe they are ready to weather this. However, we think the scarcity of capital willing to invest in places like oil and gas and other commodity interests will benefit the forward returns of these companies and, thus, us as shareholders. Think of it like you are us living in the desert. You go to the mountains in July and buy your fur coat at a big discount. You full well know that you will not be using it for months. When winter hits, you pull it out, and you are excited for cold temperatures and possibly snow – you prepared for this moment. We believe the same thing could be true for our international common stock portfolio.

[…] Stock market popularity comes and goes, but meritorious businesses like the ones we own have a history of rewarding owners over the long haul. It’s all about having the courage and patience to stand with these companies during a cold streak when the stock market’s random walk is working against us. During these challenging times, we will continue to look twice before crossing the road, but we remain confident that we will reach our destination safely.

[…] Investors and management teams often forget that the stock market isn’t a game of you versus them. It’s a game of you versus you. Mr. Market comes to you every day with a price for each company. Sometimes he’s depressed and scared. Sometimes he’s excited and euphoric, as we see among big US stocks. Mr. Market is not there to instruct you. His manic performance is something you can take advantage of or not. It really depends on how you seek to exploit him. […]

[…] Back in 2012, our portfolio traded at 12-times profits versus 14-times for the S&P 500 Index. The spread allowed us to compete very favorably with the S&P 500 Index in an era that has left stock pickers and value people in either a graveyard or in the dump. When the weighing machine kicks into gear and the stock market reestablishes “reasonableness,” we like our position in the marketplace.

For better or for worse, we at Smead Capital Management have very long memories. One of our favorite pinnacles of confidence is the financial euphoria in 2011 surrounding the Brazil-Russia-India-China (BRIC) trade. China’s command economy was growing 10% per year and helping to create momentum, which grabbed hold of the economies of nearby countries, as well as the companies and countries providing natural resources. It also captivated U.S. investors as they poured money into funds which gave them access to the momentum stocks. […]

The Federal Reserve Board reported its most recent Z-1 on household assets. It revealed that households directly own 27% of their assets in common stock and indirectly own 13% through funds/ETFs/401ks. They also have 14% of their household assets in defined benefit programs, which are currently 50% invested in common stocks. Add it all up, and you get 47% of household assets held directly and indirectly in common stock. […]

As the investors of the strategy look back at the first half of 2024, we believe it is important to understand where we sit and what our edge as investors is. With the barrage of news and noise today, we want to focus in on how we can take advantage of the markets. […]

There are four main educational disciplines that are important to us in the investment process. We believe investors need to understand economics, the history of the stock market, the mathematics of investing and the psychology of investing. At the end of the first quarter of 2024, we’d like to expound on the psychology of today’s U.S. stock market. […]