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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People Need People

In all this tech euphoria and COVID-19 quarantining, investors are missing a key fact. People need people.

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One Helluva Party

As Buffett said, this looks like “one helluva party” with the individual investors, professional investors and insiders all joining in the fun. As a former fraternity member in college, the best parties were always when you couldn’t find anyone missing. It wreaks of that today in the stock market.

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WFH is a WKF

We came up with a theory many years ago to address how important psychology is to owning common stocks. We found that the risks go up in a stock market, or in an individual stock, when a “well-known fact” (WKF) was acted on in the extreme.

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Cherry Picking is Tempting

When you run an equity portfolio which is concentrated in 25-30 common stock selections, there are usually three stocks which stick out as particularly attractive at any given time.

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Humility Produces Alpha

Our experience tells us that we have hope from the indignity and humiliation of the present circumstances.

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Energy in Dreman’s Icahn-ic Green Wing

David Dreman’s book, Contrarian Investment Strategies, was gospel to investors when it was first published in 1979. Investors had been decimated by markets going nowhere over the prior 10 years. Stock investors were ready for something new. Dreman had produced a lot of success as an investor and wanted to share his gospel of contrarian value investing.

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Breaking Big Tech

We recently read Peter Doran’s book, Breaking Rockefeller, which is a fabulous economic history of the world from 1840-1920 and focuses on how the monopoly created by John D. Rockefeller was broken from 1890-1910. We also watched a documentary called, “The Social Dilemma,” which explains, through the eyes of some of the social media creators, how incredibly damaging the monopolies, created by internet technology, are to society.

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Antitrust: The Truth Will Set You Free

Anyone who owns U.S. large cap stocks must understand what can happen from the actions of the government to enforce the laws on the books for antitrust. Contrary to popular opinion, these laws are not set up to primarily protect consumers from being gouged on price by someone with a monopoly.

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Smead’s Folly Becomes Newsom’s Folly

We became extremely bearish on energy in 2011. At the time, we saw interest in Seattle for hybrid and electric cars. This convinced us that 10% of the cars on the road nationwide might be hybrid and electric by 2020.

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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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Company-Specific Macroeconomic Multipliers

An interesting contrast was drawn on September 15, 2020 between Lennar’s (LEN) earnings call and statistics on revenue per employee at Apple Corporation (AAPL). Lennar described strong growth out into the future in a measured way, because they believe that the prior decade created a home supply deficit due to underbuilding.

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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.

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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.