Latest news with #Smead
Yahoo
24-05-2025
- Business
- Yahoo
Top investor Bill Smead: 'This is maybe the most dangerous market of my career'
Bill Smead advises against investing in the S&P 500 as momentum fuels the rally. "I don't trust the S&P 500 farther than I can throw it," Smead told BI. Smead's fund has underperformed recently, but he's enjoyed long-term success. Bill Smead was driving around Northern Alabama on Thursday, pitching potential clients on why it's an optimal time to buy into his Smead Value Fund (SMVLX). He knows it may not be an easy sell. His energy and homebuilder holdings have gotten hammered recently, and the fund has had a rough 12 months. Since May last year, it's down 11% while the S&P 500 has risen 10%. But to Smead, that's the point. Every investment discipline has its hard times, and it's during those periods when investors make money. The opposite is also true, he argues: When an investment is soaring, the likelihood that the outperformance continues decreases. That's why Smead is warning against investing in the S&P 500, which remains just below its all-time highs. "Even though the index has been a really good idea from 1981 to now in a rising market, every investment discipline goes through cold stretches," Smead said. "The longer it goes on making people rich, the more likely it is for a catch-up period." One would probably expect Smead, a value manager, to question the merits of investing in a growth-led index like the S&P 500. But he has the long-term track record to lend him credibility — over the last 15 years, he's beaten 94% of similar funds, according to Morningstar data. In 2021, Smead crushed the market by returning 40% by betting heavily on unloved economic reopening stocks and ignoring pandemic darling tech stocks. Valuations also support Smead's concerns. The Shiller cyclically adjusted price-to-earnings ratio, which measures the current price of stocks relative to a 10-year rolling average of earnings, is at one of its highest-ever levels. According to a March report from Invesco, from 1983 to 2015, the Shiller CAPE ratio has explained 78% of the S&P 500's forward 10-year returns. When valuations have been high, returns over the next decade have been low, and vice versa. Smead also points to the momentum factor as a source for his unease about the S&P 500. Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, noted earlier this year that while the S&P 500 rose 23% in 2024, the momentum factor was up 58%. That shows that a FOMO attitude is driving the market, she said, and prices are surging at a pace well ahead of earnings growth. Steve Sosnick, the chief strategist at Interactive Brokers, said in a client note on Thursday that we've seen "one of the most powerful momentum surges that I can remember" in the weeks since Trump's "Liberation Day" tariffs were paused. But market conditions have more or less been momentum-driven since the Great Recession stock-market bottom in 2009, Smead said. Eventually, he warns, things will turn in the other direction. "The momentum of the last 15 years is the biggest momentum market in US history — bigger than the roaring '20s, bigger than the go-go '60s, and bigger than the dot-com bubble in a wide variety of ways in measuring it," he said. "I don't trust the S&P 500 farther than I can throw it." "This is maybe the most dangerous market of my career, and that includes 1987's crash, that includes the savings and loan debacle market of the early '90s, that includes the 1999 to 2009 lost decade in the S&P 500 in the dot-com bubble," he continued. "This is the most difficult market of my 45 years." Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
Target CEO Under Pressure as Boycott, Tariffs Hit Sales
(Bloomberg) -- Pressure is growing on Target Corp.'s chief executive officer after the retailer cut its sales forecast following a sharp pullback in consumer spending and a hit from tariffs and boycotts. Can Frank Gehry's 'Grand LA' Make Downtown Feel Like a Neighborhood? Chicago's O'Hare Airport Seeks Up to $4.3 Billion of Muni Debt NJ Transit Makes Deal With Engineers, Ending Three-Day Strike The report sent shares falling and raised questions over Brian Cornell's ability to recapture growth after two years of choppy results — especially as economic turbulence is growing. 'It's a great brand. It's actually a great company. It just looks to us like it needs a new leadership,' said Bill Smead, chief investment officer of Smead Capital Management, which has owned the stock since 2017. Target's current management has struggled to navigate through cultural and political landscapes, Smead said, referring to the backlash around its Pride collection in 2023 and boycott calls after the company decided to halt diversity initiatives this year. It hurts the business to alienate customers, Smead said. He thinks that Target needs to focus more on its strengths and execution during economically challenging times instead of getting caught up in social issues. In September 2022, Target said that Cornell would stay in his job for about three more years. The company said Wednesday that it expects net sales to decline by a low single digit this year, down from previous guidance for an increase of about 1%. In the quarter ended May 3, comparable sales dropped 3.8%, more than analysts had expected, on fewer shoppers. Consumers also spent less per visit. 'I want to be clear that we're not satisfied with these results,' Cornell said during a call with reporters. 'We've got to drive traffic back into our stores and visits to our site.' Target shares fell as much as 7.7% in New York trading. Through Tuesday, the company's stock was down about 27% compared with a 1% increase in the S&P 500. 'The question is how long are investors willing to wait for Target and how much confidence they have in management's strategy to turn around,' said Sheraz Mian, director of research at Zacks Investment Research. Target hasn't been as nimble as competitors in responding to fluctuations in demand. Revenue has declined in five of the past eight quarters. Pressure is growing on Cornell and his team to establish growth strategies, Mian said. Walmart Inc., Target's biggest rival, has been investing in low prices, sprucing up its assortment and remodeling stores. It's also gained market share among wealthier shoppers, who used to be Target's sweet spot. Target executives acknowledged that they're not hitting the mark. Sales jumps during major holidays and limited-time design collaborations help fuel growth and bring people into stores, but the company isn't seeing that same kind of everyday momentum. 'We recognize that we've got to make sure each and every day, we deliver the right products, the right assortment, the right value that brings guests into our stores and our digital sites,' Cornell said. While that trend has hit retailers broadly, Target has been more vulnerable than some of its peers. That's because apparel, home goods and non-consumable items make up about 65% of its sales, while competitors such as Walmart rely on groceries for a larger percentage of revenue. Target has also had trouble with inventory management in recent years amid fluctuations in demand. 'We think it will be more difficult for Target in this environment given tariffs and Walmart's substantial market-share gains,' said Jefferies analyst Corey Tarlowe. Target announced a series of management changes on Wednesday that it said will improve performance. Chief Strategy and Growth Officer Christina Hennington, a Target veteran of more than 20 years and once seen as a potential successor to Cornell, will leave the company. Chief Operating Officer Michael Fiddelke will lead a newly formed group called the 'multiyear acceleration office,' aimed at positioning Target to move faster on growth priorities. The company will also double down on offering trendy, affordable products and convenient shopping experiences, executives said on a call with analysts. The Minneapolis-based company did well during the pandemic but has struggled since then as consumers spend less on clothes, home goods and other non-necessities following years of rising inflation. The worse the economic turbulence gets, the more pressure it puts on Cornell, who was once seen as a retail wunderkind after stints leading large divisions at companies such as Walmart and PepsiCo Inc. Cornell joined as the top executive of Target over a decade ago and streamlined the retailer's operations. He led the company through the pandemic and beefed up digital operations, but Target hasn't been able to generate substantive growth since then. While Target is one of many companies that have dialed back diversity programs following pressure from the Trump administration, it's experienced a bigger backlash than others because it had previously taken a strong public stance in favor of diversity and inclusion. Tariffs represent the latest obstacle. Higher levies on imported goods are expected to raise prices of goods in the near term, resulting in a decline in consumer sentiment and cautious shoppers. Executives signaled that challenges are expected to persist in the coming months. The company is adjusting prices in response to the volatile environment, executives said, without directly linking changes to tariffs — a departure from the company's more direct comments about the levies' effect in March. The retailer is moving to reduce its exposure to China. It's on track to source about 25% of its store brands from China by the end of next year, down from 60% in 2017. Target is also negotiating with suppliers on prices. Home Depot Inc. on Tuesday also struck a more conservative tone about tariffs after Walmart last week said that price increases are coming. Those remarks drew the ire of Trump over the weekend. Why Apple Still Hasn't Cracked AI Inside the First Stargate AI Data Center Anthropic Is Trying to Win the AI Race Without Losing Its Soul Microsoft's CEO on How AI Will Remake Every Company, Including His Cartoon Network's Last Gasp ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
21-05-2025
- Business
- Yahoo
Target CEO Under Pressure as Boycott, Tariffs Hit Sales
(Bloomberg) -- Pressure is growing on Target Corp.'s chief executive officer after the retailer cut its sales forecast following a sharp pullback in consumer spending and a hit from tariffs and boycotts. Can Frank Gehry's 'Grand LA' Make Downtown Feel Like a Neighborhood? Chicago's O'Hare Airport Seeks Up to $4.3 Billion of Muni Debt NJ Transit Makes Deal With Engineers, Ending Three-Day Strike The report sent shares falling and raised questions over Brian Cornell's ability to recapture growth after two years of choppy results — especially as economic turbulence is growing. 'It's a great brand. It's actually a great company. It just looks to us like it needs a new leadership,' said Bill Smead, chief investment officer of Smead Capital Management, which has owned the stock since 2017. Target's current management has struggled to navigate through cultural and political landscapes, Smead said, referring to the backlash around its Pride collection in 2023 and boycott calls after the company decided to halt diversity initiatives this year. It hurts the business to alienate customers, Smead said. He thinks that Target needs to focus more on its strengths and execution during economically challenging times instead of getting caught up in social issues. In September 2022, Target said that Cornell would stay in his job for about three more years. The company said Wednesday that it expects net sales to decline by a low single digit this year, down from previous guidance for an increase of about 1%. In the quarter ended May 3, comparable sales dropped 3.8%, more than analysts had expected, on fewer shoppers. Consumers also spent less per visit. 'I want to be clear that we're not satisfied with these results,' Cornell said during a call with reporters. 'We've got to drive traffic back into our stores and visits to our site.' Target shares fell as much as 7.7% in New York trading. Through Tuesday, the company's stock was down about 27% compared with a 1% increase in the S&P 500. 'The question is how long are investors willing to wait for Target and how much confidence they have in management's strategy to turn around,' said Sheraz Mian, director of research at Zacks Investment Research. Target hasn't been as nimble as competitors in responding to fluctuations in demand. Revenue has declined in five of the past eight quarters. Pressure is growing on Cornell and his team to establish growth strategies, Mian said. Walmart Inc., Target's biggest rival, has been investing in low prices, sprucing up its assortment and remodeling stores. It's also gained market share among wealthier shoppers, who used to be Target's sweet spot. Target executives acknowledged that they're not hitting the mark. Sales jumps during major holidays and limited-time design collaborations help fuel growth and bring people into stores, but the company isn't seeing that same kind of everyday momentum. 'We recognize that we've got to make sure each and every day, we deliver the right products, the right assortment, the right value that brings guests into our stores and our digital sites,' Cornell said. While that trend has hit retailers broadly, Target has been more vulnerable than some of its peers. That's because apparel, home goods and non-consumable items make up about 65% of its sales, while competitors such as Walmart rely on groceries for a larger percentage of revenue. Target has also had trouble with inventory management in recent years amid fluctuations in demand. 'We think it will be more difficult for Target in this environment given tariffs and Walmart's substantial market-share gains,' said Jefferies analyst Corey Tarlowe. Target announced a series of management changes on Wednesday that it said will improve performance. Chief Strategy and Growth Officer Christina Hennington, a Target veteran of more than 20 years and once seen as a potential successor to Cornell, will leave the company. Chief Operating Officer Michael Fiddelke will lead a newly formed group called the 'multiyear acceleration office,' aimed at positioning Target to move faster on growth priorities. The company will also double down on offering trendy, affordable products and convenient shopping experiences, executives said on a call with analysts. The Minneapolis-based company did well during the pandemic but has struggled since then as consumers spend less on clothes, home goods and other non-necessities following years of rising inflation. The worse the economic turbulence gets, the more pressure it puts on Cornell, who was once seen as a retail wunderkind after stints leading large divisions at companies such as Walmart and PepsiCo Inc. Cornell joined as the top executive of Target over a decade ago and streamlined the retailer's operations. He led the company through the pandemic and beefed up digital operations, but Target hasn't been able to generate substantive growth since then. While Target is one of many companies that have dialed back diversity programs following pressure from the Trump administration, it's experienced a bigger backlash than others because it had previously taken a strong public stance in favor of diversity and inclusion. Tariffs represent the latest obstacle. Higher levies on imported goods are expected to raise prices of goods in the near term, resulting in a decline in consumer sentiment and cautious shoppers. Executives signaled that challenges are expected to persist in the coming months. The company is adjusting prices in response to the volatile environment, executives said, without directly linking changes to tariffs — a departure from the company's more direct comments about the levies' effect in March. The retailer is moving to reduce its exposure to China. It's on track to source about 25% of its store brands from China by the end of next year, down from 60% in 2017. Target is also negotiating with suppliers on prices. Home Depot Inc. on Tuesday also struck a more conservative tone about tariffs after Walmart last week said that price increases are coming. Those remarks drew the ire of Trump over the weekend. Why Apple Still Hasn't Cracked AI Inside the First Stargate AI Data Center Anthropic Is Trying to Win the AI Race Without Losing Its Soul Microsoft's CEO on How AI Will Remake Every Company, Including His Cartoon Network's Last Gasp ©2025 Bloomberg L.P.
Yahoo
20-05-2025
- Business
- Yahoo
Value Investors Look for Bargains in Oil and Gas Sector
Looking at Berkshire's mindblowing $350 billion cash stash... ... one would think that there is nothing in the market that a value investor would find attractive. One would be wrong: almost half of all mid- and small-cap oil and gas stocks in the US are now trading below their book values. That's the highest level since the pandemic. And according to Bloomberg, it's a gift for value investors worshiping the gospel of Warren Buffett and his mentor Ben Graham, who referred to these kinds of opportunities as 'cigar butts.' 'We're going to take advantage of a lot of suckers,' said Cole Smead, CEO of Smead Capital Management, who has been buying additional oil and gas stocks that are trading well below book. Energy has been the second-worst performing sector in the S&P 500 in Q2, losing roughly 10% since President Donald Trump's April 2 tariff announcement, as oil prices tumble due to fears of global trade wars sparking economic slowdowns and OPEC member countries boosting production to increase supply. Two weeks ago, West Texas Intermediate crude fell to around $55 a barrel, a level it touched in April and before that February 2021. It has rebounded only modestly since then and remains down about 15% for the year. Today, shares of oil and gas companies such as Murphy Oil, Crescent Energy and Noble Corp., are trading for less than what the assets on their books are worth. That's the classic definition of value investing, where the stock is priced at less than what the business would be worth if it was stripped and sold for parts. At this point, 33% of Russell 3000 energy stocks are trading below their book values. The figure rose as high as 40% late last week, before the US and China agreed to a 90-day trade truce, which gave a slight boost to oil prices and energy stocks. The last time this happened, it preceded off a two-year run in 2021 and 2022 when energy trounced the market and was the top-performing sector. A similar proportion of large- and small- Canadian oil and gas stocks have also fallen into the same range, Bloomberg calcualtes. Smead, who is invested on both sides of the border, thinks the stocks are undervalued and poised to at least return to book value, and likely more. 'I don't need to have a rosy picture' for the energy outlook to make money trading energy stocks, Smead said. Smead isn't alone in buying energy names cheap. A handful of cash rich oil and gas companies have indicated they'll repurchase their stock if it has sold off sharply. Cenovus Energy bought back C$62 million ($44 million) of its own shares in the first quarter and has nearly tripled that to C$178 million in the second quarter so far. 'The smartest capital allocation today is to repurchase shares' rather than paying down debt, Diamondback Energy CEO Travis Stice said on a May 6 conference call. 'Buybacks are the right thing at these levels' as crude prices have slipped, Stice said, adding that he expects the Texas-based oil producer to increase its stock repurchase program. Not everyone will be able to take advantage of their cheaper stock price as they don't have the available cash. Chevron , for instance, said it will cut buybacks in the second quarter following the drop in crude. It's bigger, and higher quality peer, Exxon, however, continues to repurchase its stock with clockwork regularity as it print money quarter after quarter. Then there is also a debate about how best to value oil and gas producers. BMO Capital Markets analyst Jeremy McCrea says book value isn't a useful measurement for the energy sector since it can change quickly and dramatically with commodity prices. He prefers cash flow, Ebitda and reserve values, but says the stocks still are cheap based on those metrics. 'Typically, the best times to invest in the energy sector are when it feels the most uncomfortable,' McCrea said. 'And it's pretty uncomfortable right now just given this uncertainty. That's historically some of the better times to come into the market.' By More Top Reads From this article on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
A trade made for Buffett: energy stocks priced below book value
(Bloomberg) — Here's something you don't see in the market too often: A third of all mid- and small-cap oil and gas stocks in the US are now trading below their book values. That's the highest level since the pandemic. And it's a gift for value investors worshiping the gospel of Warren Buffett and his mentor, Ben Graham, who referred to these kinds of opportunities as 'cigar butts.' 'We're going to take advantage of a lot of suckers,' said Cole Smead, CEO of Smead Capital Management, who has been buying additional oil and gas stocks that are trading well below book. Energy is the S&P 500's second-worst performing sector in the second quarter and is leading the way lower on Thursday. It has lost roughly 14% since President Donald Trump's April 2 tariff announcement, as crude prices tumble due to fears of global trade wars sparking economic slowdowns and OPEC member countries boosting production to increase supply. Two weeks ago, West Texas Intermediate crude fell to around $55 a barrel, a level it touched in April and before that February 2021. It has rebounded only modestly since then and remains down about 15% for the year. Now, shares of oil and gas companies, including Murphy Oil Corp, Crescent Energy Inc. and Noble Corp., are trading for less than what the assets on their books are worth. That's the classic definition of value investing, where the stock is priced at less than what the business would be worth if it was stripped and sold for parts. At this point, 33% of Russell 3000 energy stocks are trading below their book values. The figure rose as high as 40% late last week, before the US and China agreed to a 90-day trade truce, which gave a slight boost to oil prices and energy stocks. The last time this happened, it preceded off a two-year run in 2021 and 2022 when energy trounced the market and was the top-performing sector. A similar proportion of large- and small- Canadian oil and gas stocks have fallen into the same range. Smead, who is invested on both sides of the border, thinks the stocks are undervalued and poised to at least return to book value, and likely more. Buying Cheap 'I don't need to have a rosy picture' for the energy outlook to make money trading energy stocks, Smead said. Smead isn't alone in buying on the cheap. A handful of well-capitalized oil and gas companies have indicated they'll be opportunistic, repurchasing their stock if it has sold off sharply. Cenovus Energy Inc. bought back C$62 million ($44 million) of its own shares in the first quarter and has nearly tripled that to C$178 million in the second quarter so far. 'The smartest capital allocation today is to repurchase shares' rather than paying down debt, Diamondback Energy Inc. Chairman and CEO Travis Stice said on a May 6 conference call. 'Buybacks are the right thing at these levels' as crude prices have slipped, Stice said, adding that he expects the Texas-based oil producer to increase its stock repurchase program. To be sure, many oil and gas producers won't be able to take advantage of their cheaper stock price because they don't have the available cash. Chevron Corp., for instance, said it will cut buybacks in the second quarter following the drop in crude. There's also a debate about how best to value oil and gas producers. BMO Capital Markets analyst Jeremy McCrea says book value isn't a useful measurement for the energy sector since it can change quickly and dramatically with commodity prices. He prefers cash flow, Ebitda and reserve values, but says the stocks still are cheap based on those metrics. 'Typically, the best times to invest in the energy sector are when it feels the most uncomfortable,' McCrea said. 'And it's pretty uncomfortable right now just given this uncertainty. That's historically some of the better times to come into the market.' —With assistance from Tom Contiliano. (Updates oil price decine and energy sector performance in fourth paragraph.) ©2025 Bloomberg L.P. Sign in to access your portfolio
