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 down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
