With the goal of generating long-term capital appreciation, the Smead Value Fund (Trades, Portfolio) is known for investing in a concentrated number of stocks that have strong competitive advantages.
In addition, its portfolio managers prioritize companies with high profitability, low valuations, shareholder-friendly management teams, high free cash flow, solid balance sheets and high insider ownership.
As such, GuruFocus is pleased to have Bill Smead, the Phoenix-based firm’s founder and chief investment officer, as one of our speakers during the annual GuruFocus Value Conference next month.
The event, which will be held at the Hilton Omaha hotel, will start on Thursday, May 4 at 6 p.m. with our first speaker and a catered dinner. Then, the other speakers will present between 8 a.m. and 6 p.m. on Friday.
Tickets are still available, but seats are limited! Reserve your spot today.
Ahead of the conference, investors who plan to attend may want to learn more about Smead’s investments in order to effectively ask him questions about his strategy. The guru’s $4.07 billionequity portfolio consisted of 24 stocks as of the fourth quarter of 2022. Filings show the equity portfolio was most heavily invested in the energy and consumer cyclical sectors.
NPORT-P filings for the three months ended Nov. 30 show the fund’s top five holdings were Occidental Petroleum Corp. (OXY, Financial), Merck & Co. Inc. (MRK, Financial), Amgen Inc. (AMGN, Financial), ConocoPhillips (COP, Financial) and Simon Property Group Inc. (SPG, Financial).
Investors should be aware that, just like 13F reports, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, they collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these filings can provide valuable information.
Occidental Petroleum
During the fourth quarter, Smead increased the Occidental Petroleum (OXY, Financial) stake by 16.29% to 5.67 million shares. As the fund’s largest holding, it accounts for 9.68% of the equity portfolio. GuruFocus estimates it has gained 31.83% on the investment so far.
The Houston-based oil and gas producer has a $57.25 billion market cap; its shares were trading around $63.74 on Monday with a price-earnings ratio of 5.02, a price-book ratio of 2.82 and a price-sales ratio of 1.72.
The GF Value Line suggests the stock is modestly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 70 out of 100, the GF Score indicates the company is likely to have poor performance going forward. It received high ratings for momentum and profitability, but the financial strength and growth ranks were more moderate and the GF Value was low.
Of the gurus invested in Occidental, Warren Buffett (Trades, Portfolio) has the largest stake with 23.57% of its outstanding shares. Dodge & Cox, Steven Cohen (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have notable positions.
Merck
The fund boosted its holding of Merck (MRK, Financial) by 5.39% to 2.51 million shares. Occupying 6.80% of the equity portfolio, it is its second-largest position. GuruFocus data shows Smead has gained approximately 48.36% on the investment to date.
The pharmaceutical company, which is headquartered in Rahway, New Jersey, has a market cap of $285.90 billion; its shares were trading around $112.66 on Monday with a price-earnings ratio of 19.73, a price-book ratio of 6.22 and a price-sales ratio of 4.83.
According to the GF Value Line, the stock is fairly valued currently.
Further, the GF Score of 80 implies the company is likely to have average future performance on the back of high ratings for profitability, growth and financial strength as well as low GF Value and momentum ranks.
With a 0.54% stake, the Vanguard Health Care Fund (Trades, Portfolio) is Merck’s largest guru shareholder. Other top guru investors include Ken Fisher (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Jeremy Grantham (Trades, Portfolio), the Parnassus Value Equity Fund (Trades, Portfolio), Simons’ firm and the T Rowe Price Equity Income Fund (Trades, Portfolio).
Amgen
The Value Fund upped its Amgen (AMGN, Financial) investment by 5.39% to 963,705 shares. As the third-largest holding, the stock makes up 6.78% of Smead’s equity portfolio. GuruFocus found it has gained around 16.98% on the investment.
The Thousand Oaks, California-based biotech company has a $134.20 billion market cap; its shares were trading around $251.33 on Monday with a price-earnings ratio of 20.75, a price-book ratio of 36.64 and a price-sales ratio of 5.16.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 86 means the company has good outperformance potential, driven by high ratings for three of the criteria and more moderate financial strength and GF Value ranks.
PRIMECAP Management (Trades, Portfolio) is Amgen’s largest guru shareholder with a 2.86% stake. Simons’ firm, Richard Pzena (Trades, Portfolio), Jefferies Group (Trades, Portfolio) and Ken Fisher (Trades, Portfolio), among others, also own the stock.
ConocoPhillips
Smead added 25.01% to the ConocoPhillips (COP, Financial) stake in the most recent quarter to 1.98 million shares. Now representing 6.01% of the equity portfolio as the fourth-largest position, GuruFocus says the fund has gained an estimated 64.61% on the investment.
The energy company headquartered in Houston has a market cap of $128.58 billion; its shares were trading around $106.10 on Monday with a price-earnings ratio of 7.31, a price-book ratio of 2.71 and a price-sales ratio of 1.75.
The GF Value Line suggests the stock is modestly undervalued.
Receiving solid ratings across the board, the company has high outperformance potential with a GF Score of 91.
Holding a 1.19% stake, Dodge & Cox is ConocoPhillips largest guru shareholder. The stock is also being held by Fisher, Diamond Hill Capital (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Elfun Trusts (Trades, Portfolio) and many others.
Simon Property Group
In the fourth quarter, the Value Fund expanded its holding of Simon Property Group (SPG, Financial) by 23.56% to 2 million shares. As the fifth-largest position, it accounts for 5.88% of the equity portfolio. GuruFocus estimates Smead has lost 0.77% on the investment since establishing it in the second quarter of 2020.
The Indianapolis-based real estate investment trust has a $35.44 billion market cap; its shares were trading around $108.46 on Monday with a price-earnings ratio of 16.63, a price-sales ratio of 11.45 and a price-sales ratio of 6.73.
According to the GF Value Line, the stock is fairly valued.
The company’s GF Score of 73 indicates it is likely to have average future performance. Although momentum and profitability are high, the GF Value rank was more moderate and the growth and financial strength ratings are low.
Smead is Simon Property’s largest guru shareholder with a 0.61% stake. The stock is also being held by Parnassus, Simons’ firm, Chris Davis (Trades, Portfolio), Grantham, Mark Hillman (Trades, Portfolio), Ron Baron (Trades, Portfolio) and several others.
Additional top holdings and performance
Rounding out the rest of Smead’s top 10 holdings are American Express Co. (AXP, Financial), Macerich Co. (MAC, Financial), Lennar Corp. (LEN, Financial), D.R. Horton Inc. (DHI, Financial) and NVR Inc. (NVR, Financial).
In 2022, the Value Fund returned -2.78%, outperforming the S&P 500’s return of -18.11%.
