The growth to value rotation is like pouring water from a fire hose into a teacup: portfolio manager
Bill Smead, Chief Investment Officer of Smead Capital Management, joins Yahoo Finance's Jared Blikre to discuss how to invest like Warren Buffett in a post COVID-19 trading environment.
Video Transcript
JARED BLIKRE: We know Buffet is pretty famous for getting really great deals-- Goldman Sachs in the global financial crisis. I think he's even making a bunch of money on Occidental Petroleum now, not to mention a fat dividend. Do you go after any of these deals? And if so, how do you spot them?
BILL SMEAD: I would argue the opposite on Buffet.
JARED BLIKRE: Really?
BILL SMEAD: Let me explain. Buffett has $140 billion in cash. He has to spend $30 billion on an individual company to be impactful in the slightest. And we've just gone through a 10- to 12-year stretch where growth stocks and the index have done spectacularly, therefore making the market capitalisation of companies way higher than that threshold. So a year ago, one of Buffet's biggest problems was that the best ideas a year ago were tiny and it put the Smead Value Fund into the driver's seat, right? We're much smaller, so we can put $50 million into something and be really happy.
So the truth of it is, a year ago what Buffett should have said was my teacher, Ben Graham, this would be Nirvana for him a year ago. He could have put some money in 100 different companies that were trading at depressed prices because of the pandemic and done extremely well. And he would have. And so I would argue-- and we adjust how much Berkshire Hathaway we own based on how compelling it is compared to what we're doing.
And what we're doing is way more compelling because when money comes out of popular growth stocks it's like a fire hose and the companies that it's going into are a teacup. You're pouring water from a fire hose into a teacup and that's also part of what happened with Reddit and Arkagos.
