Smead Capital Management is a Seattle-based investment firm that manages a high quality, large-cap value portfolio with boringly dry turnover via separate accounts, subadvisory, and mutual funds in the United States and abroad. We are contrarians and welcome like-minded investors on this journey.

1001 4th Avenue, Suite 4305
Seattle, WA 98154
877.701.2883
www.smeadcap.com

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Commentary

Quality is Missing the Point

I got very excited when I came across an excerpt from Jordan Ellenberg’s book, How Not to Be Wrong. His book was written to teach readers how much logic and common sense is provided by math. He tells the story of Abraham Wald during World War II, who worked for the Statistical Research Group (SRG).

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There Is No Alternative (TINA)

We hear numerous market strategists talk about stocks which are going up because “there is no alternative” to owning them. In the Wall Street vernacular, this goes by the phrase TINA.

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Value’s Lifeblood is Performance Chasers

While listening to Rob Arnott on a recent Morningstar podcast, I became enamored with something that Arnott was emphatic about. He pointed out that the structural advantage of being a contrarian isn’t being smarter. Every winning purchase in the stock market comes as an opportunity cost to the seller.

Commentary

The Inflation Cocktail is Being Mixed

Since the inflation cocktail is closely related to value stock outperformance, we are very excited about our future value investing possibilities.

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Value in the Four-Minute Mile

Due to the pandemic, there is a sense of permanence on Wall Street to what has transpired. This permanence focuses on the changes that we have seen in the recent five months in our daily lives. These changes include shopping online versus shopping in-person, getting takeout versus sitting in a restaurant and working from home instead of talking sports around the water cooler with our colleagues.

Commentary

Economic Normality: When? Sooner? Never?

In the time since COVID-19 hit the economy and stock market, there has been three phases. First, the question was ‘when’ will the economy return to pre-COVID normal? Next came ‘sooner or later’? Recently, we have moved to ‘will the economy ever come back’? For long-duration investors like us, what are the investment implications in where we are now in a U.S. stock market with many securities priced for ‘never’?

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True Stories of Financial Euphoria Circa 1998-1999

When you are in a financial euphoria episode, like the one we are in currently, it is hard to visualize the impact it has when it breaks. Historically, it is the leading cause of stock market failure. We thought it would be helpful to discuss the secondary impact of the euphoria on common stocks.

Commentary

The Fear of Stock Market Failure

The stock market is a big place with thousands of investments that you can make as an investor. It’s a frustrating place. There is a myriad of investing disciplines that you can seek out. As a millennial, my generation is learning this for the first time. Don’t kid yourself for one second: they will destroy wealth.

Commentary

To Hell and Back

Everyone who owned common stocks in the U.S. went through hell in the first quarter of this year. The 36% decline in the S&P 500 Index in February and March was the fastest 36% decline of my lifetime. This hell was especially damaging to those of us who have a positive view of the U.S. economy over the next ten years.

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The Boy Who Cried Wolf

The nice thing about being the boy who cried wolf is that you look stupid before you are proven correct and you look smart when you are right, but nobody believes you until it is too late.

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Sins of Omission

With markets extremely difficult and volatile as we work through COVID-19, we thought it would be good to review important parts of our investment discipline. One way to do that is to consider stocks we found via our eight criteria for stock selection and did not keep long enough to get to their ultimate rewards.

Commentary

Amazon vs. eBay: A Case Study in Business Models

On June 4, 2020, eBay (EBAY) released a business update to make investors aware that the quarantine circumstances have caused their business to perform “significantly better than expectations,” compared to their earnings report on April 29, 2020.

Commentary

1972 + 1974 = 2020

The oddity of today’s stock market is exactly what any God-fearing value manager should pray for. There are very few scenarios in the last 50 years that can be used to model or forecast what is currently going on.

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American Pie

A series of charts and historical evidence exists in late May of 2020 which shows that the S&P 500 Index and the vast majority of institutional investors of all shapes and forms have concentrated their investments in the most popular stocks in the stock market.

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Only the Lonely Can Play

Great investment opportunities are lonely. History shows us the crowd behaviors to avoid and the investment market circumstances to capitalize on. We believe we are at one of the great junctures, where the crowd thinks they unequivocally know the future.