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Money Manager Pride Goeth Before Destruction
by Bill Smead of Smead Capital Management, 8/16/11
All great money managers reach a point in their career where adulation and self confidence detracts from their better judgment. This interruption in judgment usually coincides with the discipline in use becoming the most popular discipline in the marketplace or the investing style being overdue for a three to five-year correction. Studies of the equity managers with the best long term records show that the best underperform the S&P 500 Index 35% of the time. The pride associated with multi-decade success and an army of folks enjoying your work is probably the most dangerous thing.

As Investors Panic: Calculating Intrinsic Value with a High Margin of Safety
by Bill Smead of Smead Capital Management, 8/12/11
When markets get super difficult it is great to be able to lean on valuation methods with a high margin of safety. Ben Graham had a simple and beautiful formula for computing intrinsic value. There are two simple ways to get a high margin of safety when using Grahams simple intrinsic value calculation. First, you can use a much lower ten-year growth expectation than other stock market participants. Second, you could use a much higher interest rate than the current ten-year AAA corporate bond. We would like to look at a few of our current holdings through the prism of intrinsic value.

Training Wreck Waiting to Happen
by Bill Smead of Smead Capital Management, 8/3/11
Someday soon, as the charade of uninterrupted GDP growth catches up with the Totalitarian Communist Government, we believe the entire Chinese banking system will have to be recapitalized to the tune of over $1.5 trillion. At that point, there wont be enough money to lend for new projects to even maintain existing GDP. In our opinion, there will be an economic contraction in China lasting three to four years. Whether China is to become a truly great economy will be determined by what they do in the aftermath of the coming economic train wreck.

From Asset Allocation Nirvana to Asset Allocation Nightmare
by Bill Smead of Smead Capital Management, 7/27/11
We believe the next 10 years will be about money moving back into non-cyclical US large cap stocks and domestic companies which enjoy lower commodity prices and the repatriation of money from highly risky asset classes with poor odds. Being widely asset allocated today prepares folks for an under-performance nightmare In our opinion, bonds are expensive, commodities are outlandish, small caps trade at a huge premium and as Chinas economic contraction occurs, the crowd will flee emerging markets.

Low P/E Quintile Courage
by Bill Smead of Smead Capital Management, 7/15/11
What most of the academic studies don?t tell people is that the companies which make it into the lowest PE quintiles have had some big problems or challenges which got them there in the first place. We use our eight proprietary criteria to find the ones which we think are the most likely to move their way back up through the quintiles and, possibly, be long-duration holdings for our discipline.

The Biggest Bear Market Rally of All?
by Bill Smead of Smead Capital Management, 6/30/11
Most stock market participants screamed ?bear market rally? in the summer of 2009 as the US market exploded to the upside from the March 2009 low. They were referring to the phenomena whereby a major rally follows a bear market, retraces some of the prior decline and attempts to suck most investors back into the market. These ?sucker? rallies are debilitating because they heap agony those who end up getting caught twice in the same secular decline. We believe the rally in oil to $115 is possibly the biggest ?bear market? rally ever and we advise folks to protect their capital.

Summer Bargains Galore
by Bill Smead of Smead Capital Management, 6/22/11
While China?s economy is hitting the wall and investors are beginning to deal with what we believe is a major bear market in commodities, it is time to stop and examine some of the bargains created by the recent correction. We have said many times that valuation matters. We believe one of the biggest bargains currently is Aflac (AFL). They are the largest seller of supplemental health insurance in Japan and the US. Japan and the US are probably the two countries which would benefit more from a decline in commodity prices than any others in the world.

The Exodus
by Bill Smead of Smead Capital Management, 6/17/11
Prices of residential real estate in Vancouver have skyrocketed. Over 70% of these purchases were from Chinese Nationals driving prices high. Compared to average household income, Vancouver is nearly twice as expensive as New York. Gordon Chang of Forbes wrote an article titled ?Chinese Entrepreneurs Are Leaving China?. Here is how Gordon began to explain the phenomena:?China?s rich, driven by a sense of insecurity, are taking money out of their country. Many are actually preparing to move elsewhere" There is an exodus of the best and brightest business people coming out of the country.

Cash Hoards
by Bill Smead of Smead Capital Management, 6/2/11
In Saturday?s WSJ, Jason Zweig asked the question, ?What will it take for companies to unlock their cash hoards?? Here we expound on his thoughts and examine our own portfolioin this light. First, companies with large cash balances are adding to them. Second, payouts are historically low. Third, the point has probably come where the best interests of corporate management and the shareholders are at odds. Zweig zeroed in on Ben Graham?s thoughts in regards to why big companies that generate high levels of free-cash flow are hesitant to return cash to shareholders.

Bull Case Nobody Makes
by Bill Smead of Smead Capital Management, 5/25/11
We feel compelled to make a US stock market bullish case which feels as good to this writer as avoiding tech stocks did in late 1999. It is so lonely that it is divine. Andy Grove, former Intel CEO, college prof John Maynard Keynes said, ?When everyone knows that something is so, it means that nobody knows nothin?.? We believe the majority has put their assets into investments that will provide defeat, insecurity and failure. Out of this comes a very optimistic bull case which is available to those who have courage to look foolish in the short run and avoid today?s popular asset allocation.

More People
by Bill Smead of Smead Capital Management, 5/20/11
As value managers, we are interested in secular trends. We seek company characteristics which lead us to non-cyclical businesses which are not capital or labor intensive. For this reason, we love businesses which need more people (as customers) to become more profitable. Unfortunately, from time to time, markets massively over-capitalize industries which they believe will benefit from having more people. Historical examples: The 1929 stock market peak was built around the idea that there would be more people to listen to radio, drive cars and fly on planes. The concept was over-capitalized.

Supreme Moment
by Bill Smead of Smead Capital Management, 5/11/11
Kairos- is an ancient Greek word meaning the right or opportune moment (the supreme moment). The world of value investing and portfolio management includes mean reversion and patience. Speculative episodes typically go on for much longer than expected. This fact forces us to take a stand by avoiding overvalued common stocks and owning undervalued shares. Everyone would love to make their adjustments at the ?Kairos?. We believe that the greatest existing misallocation of capital in the world today is based on over-confidence in the uninterrupted growth of emerging markets.

True Grit
by Bill Smead of Smead Capital Management, 2/11/11
We believe a whopper of a recession is coming in China. In our mind, it is only a question of when. Until then we will practice True Grit in our portfolio management and wait for history to repeat in the way we believe is inevitable.

Outlook 2011
by Bill Smead of Smead Capital Management, 2/10/11
The year 2010 took us on quite a ride and ultimately delivered acceptable returns in both the US stock and bond markets. Our returns were commensurate with the index, but did so without exposing our clients to what we consider the primary long term risks that exist today. Those two primary risks we see in 2011 involve bonds and China.
Results 251–264 of 264 found.