Earlier this week, the Smead Value Fund (Trades, Portfolio) disclosed its equity portfolio for its fiscal fourth quarter, which ended Nov. 30.
Part of Phoenix-based Smead Capital Management, the fund is managed by Bill Smead and Cole Smead. Taking a contrarian approach to stock picking, the fund managers look for large-cap stocks that meet the following criteria: serve an economic need, have a strong competitive advantage, have a long history of profitability and strong operating metrics, generate high levels of free cash flow, are undervalued, have a strong balance sheet, show insider ownership and have a history of management being shareholder-friendly.
Based on these criteria, the NPORT-P filing shows the fund entered two new positions during the quarter, sold out of three stocks and added to or trimmed a number of other existing investments. Its most notable trades for the three-month period included the dissolution of its stake in Continental Resources Inc. (CLR, Financial) following an acquisition, a new investment in Ovintiv Inc. (OVV, Financial), a boost to the Occidental Petroleum Corp. (OXY, Financial) position and a new holding in U-Haul Holding Co.’s (UHAL.B, Financial) non-voting shares as well as a reduction in its investment in voting shares (UHAL, Financial).
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
Continental Resources
The Value Fund’s 6.17 million-share stake in Continental Resources (CLR, Financial) was dissolved after it was taken private by its founder, Harold Hamm, in a $4.3 billion acquisition deal with Omega Acquisition Inc. The transaction closed in November of 2022. The stock traded for an average price of $71.13 per share during the quarter.
GuruFocus estimates the fund gained 132.82% on the investment, which was previously its largest holding with an 11.74% weight, over its lifetime.
Established in 1967, the Oklahoma City-based company has become one of the top oil and gas producers in the U.S.
According to the terms of the all-cash deal, shareholders received $74.28 per share.
Other gurus who were invested in the company prior to the close of the acquisition included Jeremy Grantham (Trades, Portfolio), John Hussman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Ovintiv
The fund invested in 3.35 million shares of Ovintiv (OVV, Financial), allocating 4.58% of the equity portfolio to the stake. Shares traded for an average price of $51.62 each during the quarter.
The oil and gas producer, which is headquartered in Denver, has a $12.25 billion market cap; its shares were trading around $49.33 on Wednesday with a price-earnings ratio of 3.50, a price-book ratio of 1.88 and a price-sales ratio of 1.02.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
The GF Score of 78 out of 100 indicates the company is likely to have average performance going forward. While it received high ratings for profitability and momentum, its growth, financial strength and GF Value ranks were more moderate.
Of the gurus invested in Ovintiv, Dodge & Cox has the largest stake with 8.71% of its outstanding shares. Daniel Loeb (Trades, Portfolio), Hotchkis & Wiley, Steven Cohen (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) also have notable positions in the stock.
Occidental Petroleum
Expanding the Occidental Petroleum (OXY, Financial) position by 16.29%, Smead picked up 794,346 shares. The transaction had an impact of 1.36% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $68.16.
It now holds a total of 5.67 million shares, making it the fund’s largest holding with a weight of 9.68%. GuruFocus data shows Smead has gained around 32.16% on the investment so far.
The Houston-based oil and gas producer has a market cap of $57.78 billion; its shares were trading around $63.63 on Wednesdaywith a price-earnings ratio of 5.16, a price-book ratio of 3.05 and a price-sales ratio of 1.73.
According to the GF Value Line, the stock is modestly overvalued currently.
Further, the GF Score of 68 means the company is likely to have poor performance going forward. Despite having a high rating for profitability, its growth, momentum and financial strength ranks were moderate and its GF Value was low.
With a 21.38% stake, Warren Buffett (Trades, Portfolio) is Occidental Petroleum’s largest guru shareholder. Dodge & Cox and Cohen also have large holdings.
U-Haul
The fund gained 1.66 million of U-Haul’s non-voting shares (UHAL.B, Financial), dedicating them to 2.59% of the equity portfolio, while reducing its holding of voting shares (UHAL, Financial) by 69.17%, or 1.14 million shares. During the quarter, the non-voting shares traded for an average price of $58.10 each, while voting shares averaged $54.15.
The fund now holds 510,581 voting shares, which occupy 0.79% of the equity portfolio. GuruFocus says it has gained an estimated 15.52% on the investment, which was established in the third quarter of 2020.
The truck rental and self-storage company headquartered in Phoenix, which recently transferred its listing from the Nasdaq to the New York Stock Exchange and changed its name from Amerco, has a $13.03 billion market cap; its non-voting shares were trading around $62.32 on Wednesday with a price-earnings ratio of 11.59, a price-book ratio of 2.06 and a price-sales ratio of 2.20.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 70, however, indicates the company is likely to have average performance going forward due to high ratings for profitability and growth, a more moderate financial strength rank and a low grade for GF Value. It did not get a momentum rank.
The Yacktman Focused Fund (Trades, Portfolio) and the Yacktman Fund (Trades, Portfolio) are the only other gurus invested in the non-voting stock. Of the gurus invested in the voting shares, Yacktman Asset Management (Trades, Portfolio) has the largest stake with 3.74% of its outstanding shares. David Abrams (Trades, Portfolio), Robert Bruce (Trades, Portfolio), Hotchkis & Wiley, Third Avenue Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, First Pacific Advisors (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates also own the stock.
Additional trades and portfolio composition
During the quarter, Smead also sold out of Comcast Corp. (CMCSA, Financial) and Organon & Co. (OGN, Financial), reduced its holding in Warner Bros. Discovery Inc. (WBD, Financial) and added to its Macerich Co. (MAC, Financial) and ConocoPhillips (COP, Financial) positions, among others.
The Value Fund’s $4.07 billion equity portfolio, which was composed of 24 stocks, is most heavily invested in the energy, consumer cyclical, financial services and health care sectors.
