Morningstar, Day One: Smead Value (SMVLX) – in 125 words

Comments

• Charles

  June 2013 edited June 2013

  Smead Value (SMVLX) happens to be an Aspiring Great Owl...
  
  
  
  
  Here are its numbers since inception along with a couple other notables (DODGX and FAIRX) for comparison:
  
  
• VintageFreak

  July 2013

  If you see the chart below, you see SMVLX started bettering VFINX only in later half of last year. These IMO skews all performance numbers. Also I'm not sure it is less volatile or safer. For a buy and hold approach IMO, it is a crap shoot as to which is better. One did not start making money in this fund from inception compared to the S&P until late 2012. So when you buy funds like these, you have to catch them at their CUSP. MXXVX, CGMFX are more radical examples, than SMVLX, but I find it difficult to jump on the bandwagon just yet
  
  http://quote.morningstar.com/fund/chart.aspx?&t=SMVLX&region=usa&culture=en-US
  
• ron

  July 2013

  Reply to @Charles: Where can we see these charts?
• andrei

  July 2013

  I just wanted to post the same message as VintageFreak. I do not understand what seems to be so good about SMVLX? They lost much more than S&P 500 during 2008 (they lost more than 50%), despite the fact that they probably have not been fully invested at that time (their fund was born in 2008). After that they were growing faster than S&P 500, but it took them 5 years, since inception, to break even with S&P 500.
• David_Snowball

  July 2013

  Most of the 2008 relative failure occurred in the first three weeks of the fund's existence. Here's Mr. Smead's discussion of that period:

  Our first year of managing the Smead Value Fund could not have been more difficult. The fund began trading on Jan. 2nd with an over-weighted position in financials and by three weeks into the year had fallen behind the S&P 500 Index significantly. For the year ended Nov. 30 the fund fell -43.72%, versus a decline in the S&P 500 Index of -36.76%, as we made up some of the relative performance ground from April through May by not losing as fast as the index.
  
  Most of our poorest performers were financial companies which we got out of on the way down like Washington Mutual, AIG and Wachovia Bank.

  Absent those first three weeks, the fund dropped around 37% through the rest of the year and the S&P dropped around 35%. The fund also trailed the S&P for four consecutive quarters from 2Q2010 - 1Q2011. Here's his take on, and reaction to, those markets:

  At the end of November, 2010 we explained that there were two big risks in the US stock market. We were concerned about how an improving economy might ultimately hurt bond investments and felt that this would be the year that China’s economy would slow dramatically. Therefore, we have rescreened our portfolio to eliminate our exposure to China’s slowdown. We have removed any energy and industrial holdings to help mitigate these risks.
  
  We want to make all the money for you in common stocks that we can while trying to shield you as much as possible from what we perceive are the biggest risks going forward. We have been faithful to that call and fully expect that approach should help us to outperform in the long term. Most folks don’t realize that all the gains in the stock market since the 2009 lows have come while both institutional and individual investors have been net sellers of Large-Cap US stocks.
  
  Performance for the Investor Class shares of the Smead Value Fund for the six month period ended May 31, 2011 was +11.15%. We underperformed our benchmark, the Russell 1000 Value Index, which returned +16.67%. Our best performing stocks in the last six months have been Accenture, Pfizer and Walgreens. Our pharmaceutical stocks have shown relative strength in the last 90 days, but our financial stocks have weakened as some additional worries about getting past the last big slug of foreclosures in the US housing market has attracted great fanfare and attention. We feel the pessimism is overdone. Both financial and consumer discretionary stocks offer significant upside potential.
  
  The Positive Case Which Nobody Makes
  
  We have a much brighter vision of the next 5 to 10 years than do most other money managers. The US has done a great job of adjusting to the deep recession of 2008-09 by recapitalizing its banking system, and US households have quickly crawled back inside their incomes and worked toward cleaning up their balance sheets. Our savings rate has risen to 6% in the US. The massive cleansing of our economy could soon put us in a position similar to 1982 and 1992 where dour news precluded people from seeing upcoming extended periods of prosperity.

  The fund has outperformed the S&P in each of the past nine quarters, starting in April 2011 and including the two quarters with negative market returns. It's performance against its large blend peer group has been stronger than its performance against the unmanaged benchmark. It has outperformed them (and the S&P) since inception and in four of its six calendar years (including 2013 YTD).
  
  For what it's worth,
  
  David