Tech is starting to crack and value is outperforming. Where should you be positioned? On this episode of In the Money with Amber Kanwar, the show heads to Phoenix, Arizona for a special on-the-road episode with Bill and Cole Smead of Smead Capital Management, the father-son investing team behind $5.5 billion in assets under management. In a wide-ranging and candid conversation, the duo explains why today’s market setup looks increasingly fragile and where disciplined value investors are still finding opportunity.
This segment is brought to you by ATB Financial. With over $100 billion in assets, ATB Financial is powering possibilities for more than 843,000 financial services clients. ATB Cormark Capital Markets is a leading North American investment firm providing holistic corporate and capital markets advice and full-service financial solutions. Visit www.ATB.com/inthemoney for more information.
Four value stocks from Smead Capital Management
A regional banking powerhouse with a focus on stability and growth through smart consolidation.
- Strong Balance Sheet and Boring Reliability: Identified as a meritorious regional bank with a robust balance sheet, making it resilient amid economic fears and outperforming post the 2023 banking crisis retest.
- Accretive Acquisition of Commerce America: Recently acquired Commerce America at an attractive price, enabling significant cost synergies by eliminating redundant executive teams and overhead, similar to efficiencies in other consolidating industries.
- Scale Advantages in Tech and Operations: The merger enhances the tech stack and overall scale, positioning the bank for better efficiency and profitability in a consolidating sector.
UnitedHealth Group (UNH)
A healthcare giant providing essential services, bought on weakness for decade-long holding.
- Long-Term Compounding Potential: Positioned for a 7% compounded annual return (including dividends) over the next 10 years, even if the S&P 500 declines, due to its durable business model.
- Essential Government-Reliant Services: Offers products and services critical to the U.S. government and healthcare system, ensuring sustained demand regardless of short-term pressures.
- Attractive Entry After Market Pressure: Entered at a dipped price following recent underperformance, with potential for multiple expansion and recovery to prior highs like $600 per share over time.
Strathcona Resources (SCR)
A Canadian energy player trading at a discount, with strong management execution and growth prospects.
- Compelling Valuation Post-Pullback: After a $10 special dividend and failed MEG Energy acquisition attempt, the stock has lagged peers but now offers attractive pricing relative to its assets and production potential.
- Proven Management Delivery: Leadership has consistently followed through on commitments, including the dividend payout and a value-accretive acquisition from Cenovus, stealing high-quality Saskatchewan assets at a bargain.
- Low-Cost Production Growth: Plans to expand production at under $30,000 per flowing barrel while trading at $60,000 per flowing barrel, creating value through organic growth and operational efficiency.
West Fraser Timber (WFG)
A leading Canadian lumber producer benefiting from supply dynamics and policy-driven opportunities.
- Supply Curtailments Driving Price Upside: Current industry supply reductions due to low prices are setting the stage for higher future prices, as low prices cure themselves in cyclical commodities.
- Government Involvement Creates Edges: Policy interventions in the sector often lead to mispricings and investor opportunities, with West Fraser well-positioned after navigating tariffs and disputes like the softwood lumber issue.
- Potential for Countercyclical Insider Buying: History of strategic purchases by key insider Jim Pattison during downturns, signaling confidence in the business amid housing market challenges and making it a timely buy.
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