Smead Capital Management CIO Bill Smead sits down with Yahoo Finance Live to review Berkshire Hathaway CEO Warren Buffett’s most recent shareholders letter, the billionaire investor’s investing philosophy, and how he has capitalized on trading trends in the past.
Video Transcript
SEANA SMITH: All right, Warren Buffett publishing his annual letter to Berkshire Hathaway shareholders this weekend. In his latest entry into the 60-plus-year tradition, the so-called Oracle of Omaha preaching the merits of reinvestment, writing, quote, “The power of compounding your money inside a successful business for a long time is nearly unmatched in capitalism.”
Joining us now to discuss a little bit more about that and also what else we heard from Buffett over the weekend, I want to bring in Bill Smead, Smead Capital Management chief investment officer. Bill, it’s great to see you again. So certainly no shortage of lines that we could pick out here from the shareholder letter over the weekend– share buybacks, taxes, earnings, long-term optimism here on the US economy just to name a few. Just first, your takeaway from the shareholder letter that we just got.
BILL SMEAD: Well, we thought it was a great letter. And one of the things was he said he makes an incredibly important decision on average once every five years. In a 60-year stretch, he came up with about 12 investments that made all the difference for him, which you compare that to what most people do and what most of your watchers and most of the behavior of investors in the United States, and they change– they change their stocks about as often as they change their clothes.
JARED BLIKRE: Bill, great to see you here today, and you and I have talked about this at webinars generally surrounding Warren Buffett’s releases of the annual shareholder letter in years past. And if we’re on this schedule, let’s see, a dozen good business ideas once every 60 years or every 60 years. That’s about once every– one great idea once every five years. Do they still have it? Munger and Buffett, are they still executing?
BILL SMEAD: Yeah, the reason for that is they got very large, and that limited what they could do, right? They have to do things in a very, very large way. When in the first 25 years Buffett was picking stocks, he had a huge information advantage over everyone else and the education he got from Ben Graham, who was an excellent buyer of $0.50 dollars.
So what Munger helped him realize in See’s Candy and brands is that as you manage very, very large amounts of capital, you’re going to be limited in the number of good ideas that are available to you. If Buffett was running $10 billion, he could have just gone out in the spring of 2020 and had a Ben Graham delight session. But instead, he had $120 billion and has looked for things like OXY and Chevron to put it in based on their view of the next 10 years.
JARED BLIKRE: And Bill, you and I have also talked about some of the secular tailwinds benefiting certain industries. You take a look at millennials and with the continued demand we expect them to have for housing over the next decade. You can tie oil into some secular themes there. Just wondering how you’re seeing Buffett play out in the 2020s and his style of investing here.
BILL SMEAD: That’s a great question. Buffett mentioned that you need to be a lifelong learner, and when things change, you need to learn and adapt with it. And what he figured out was the railroad industry was going to be dramatically more attractive to him when it was only four companies, including the company that he bought, Burlington Northern Santa Fe.
We feel that same way about the three homebuilders that we own. That industry has changed dramatically. It used to be a land development business where you put a house on it to turn the lots over, right, to gain the profit out of the lot. Now in the case of Horton, Lennar, and NVR, the vast majority of the land they build on is developed by someone else, and they are just a home manufacturer.
So we find that business incredibly attractive because there’s 92 million millennials coming, and now that people have gotten off of their big city, single, expensive apartment routine in, you know, the major coastal cities and are spreading themselves out across the country, there’s an awful lot of homes to be built.
JARED BLIKRE: All right, we’ve got to leave it there, but always glad to have your insights, especially when it surrounds the Warren Buffett annual share– excuse me, shareholder letter. Bill Smead, thank you.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
