Bill Smead, chief investment officer of Smead Capital Management, urged caution in regard to approaching the market during an interview with CNBC's "The Exchange" on Monday.
"We would not be interested in owning the S&P 500 Index, which is now just going to be chock-a-block with very expensive and very popular items that will do better if we stay in quarantine," he said. "Obviously, we are nervous for our friends who've been feasting in the growth stock world the last two or three years."
Shunning the high-flying growth stocks, the guru's Phoenix-based investment firm, which he founded in 2007, currently favors homebuilders. While an increasing number of millennials are starting to show more interest in owning a home, there is a shortage of existing houses to buy.
"So Covid got people going, it got millennials interested in owning a home, but now there's 90 million millennials versus 65 million gen Xers," Smead said. "That means 36% more people need a house. Last time I checked, myself and other people over 60 are way less interested in selling their house than they were before Covid hit."
As of the end of the third quarter, Smead's $1.58 billion equity portfolio had stakes in Lennar Corp. (LEN, Financial), D.R. Horton Inc. (DHI, Financial) and NVR Inc. (NVR, Financial).
Watch the full segment from the interview below.
Disclosure: No positions.
Read more here:
- Bed Bath & Beyond Continues Transformation With Sale of Cost Plus World Market
- Steven Cohen Boosts Health Care Exposure With 2 Biotech Stocks
- John Rogers' Firm Ups Stakes in 2 Companies
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
