A July 1974 Forbes article
profiled Sir John Templeton and highlighted some of the wisdom he
implemented in his investment process. The article touched on his
discipline of consistently praying to God “for wisdom and clear
thinking” at the start of each directors' meeting for the Templeton
Growth Fund. Templeton noted that even with prayer they still “make
hundreds of mistakes, but we don’t seem to make as many as others.”
In the article, Templeton also advised that “ninety-nine percent of investors shouldn’t try to get rich too quickly; it’s too risky.” He advised, “Try to get rich slowly.” Templeton is on nearly every short list showcasing the most successful investors of all time, and certainly held in high esteem among value and contrarian managers like us.
... With that as a given, we want to remind investors of our role in all of this: we are long-duration investors. Contrarian investors make money when they buy into temporary misery and sell into excitement or mania. The great financier and investor Bernard Baruch would have illustrated good investing as “buy[ing] straw hats in the winter.” We would add by saying that once purchased, investors should simply do their best to get out of the way and allow the fundamentals of those businesses to drive the results. In Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) 1996 letter to shareholders, Warren Buffett (Trades, Portfolio) advised:
“If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."
At Smead Capital Management, we like to say that we are arbitrageurs of time. When the idea of having to wait becomes distasteful in the psyche of investors, they will greatly discount extraordinary – but perhaps mundane – businesses. We like to use those opportunities to acquire shares.
As contrarians who implement these tenets of investing, we own, in our view, a portfolio full of great businesses that lack current investor excitement. We operate on long-term ideas such as household formation, banking needs and the kind of sustained economic growth that paves the way for business and consumer spending to grow over time. We find attractive value in our banks, home-builders, media companies, health care and select retailers. We believe the economic needs our companies address will persist over time, and we want to be in front of the profitability and cash flow that can be gained in the process.
***
I wonder how good these Smead guys are?
I see they have a fund called Smead Value Fund. Looking at the latest (2Q 2017) shareholder letter, SMVLX (the investor class shares) has returned 18.72%, 15.51%, 7.91% for 1 year, 5 years, inception (1/2/08). The S&P 500 has returned 17.90%, 14.63%, 7.73%. A very slight outperformance. Which is actually good, because most funds underperform.
Looking at the website, their top ten holdings are AMGN, NVR, BRK.B, JPM, AXP, BAC, EBAY, PYPL, AFL, LEN.
I guess they're OK, but they're not really knocking it out of the park.
In the article, Templeton also advised that “ninety-nine percent of investors shouldn’t try to get rich too quickly; it’s too risky.” He advised, “Try to get rich slowly.” Templeton is on nearly every short list showcasing the most successful investors of all time, and certainly held in high esteem among value and contrarian managers like us.
... With that as a given, we want to remind investors of our role in all of this: we are long-duration investors. Contrarian investors make money when they buy into temporary misery and sell into excitement or mania. The great financier and investor Bernard Baruch would have illustrated good investing as “buy[ing] straw hats in the winter.” We would add by saying that once purchased, investors should simply do their best to get out of the way and allow the fundamentals of those businesses to drive the results. In Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) 1996 letter to shareholders, Warren Buffett (Trades, Portfolio) advised:
“If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."
At Smead Capital Management, we like to say that we are arbitrageurs of time. When the idea of having to wait becomes distasteful in the psyche of investors, they will greatly discount extraordinary – but perhaps mundane – businesses. We like to use those opportunities to acquire shares.
As contrarians who implement these tenets of investing, we own, in our view, a portfolio full of great businesses that lack current investor excitement. We operate on long-term ideas such as household formation, banking needs and the kind of sustained economic growth that paves the way for business and consumer spending to grow over time. We find attractive value in our banks, home-builders, media companies, health care and select retailers. We believe the economic needs our companies address will persist over time, and we want to be in front of the profitability and cash flow that can be gained in the process.
***
I wonder how good these Smead guys are?
I see they have a fund called Smead Value Fund. Looking at the latest (2Q 2017) shareholder letter, SMVLX (the investor class shares) has returned 18.72%, 15.51%, 7.91% for 1 year, 5 years, inception (1/2/08). The S&P 500 has returned 17.90%, 14.63%, 7.73%. A very slight outperformance. Which is actually good, because most funds underperform.
Looking at the website, their top ten holdings are AMGN, NVR, BRK.B, JPM, AXP, BAC, EBAY, PYPL, AFL, LEN.
I guess they're OK, but they're not really knocking it out of the park.
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