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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Smead International Value Fund 2024 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Smead International Value Fund)

Primary Source Intelligence • Q1 2024 Letter Analysis

Smead International Value Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Smead International Value Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+12.25%

Annualized+12.83%

Digest Analysis

Quick Take

"Driven by energy and banking positions. Managers argue higher natural rates are here to stay due to government spending and structural economic changes."

Executive Summary

The Smead International Value Fund delivered strong performance in Q1 2024 with a 12.25% return, outperforming the MSCI EAFE Index by 6.47%. Key contributors included Unicredit SPA, Meg Energy, and Cenovus Energy, while coal holdings faced headwinds from weakened Chinese demand. The managers added Roche Holdings as a new position, capitalizing on valuations not seen since the Global Financial Crisis. The letter extensively discusses their thesis on higher natural rates, arguing that government spending and structural economic changes make it difficult for central banks to tackle inflation. Unlike the credit-sensitive economy of the past, today's asset-light businesses with software and R&D expenses are less affected by rate changes. The managers believe investors anchored in low-rate expectations will struggle, while pragmatic investors should focus on energy and banking sectors offering low valuations and attractive returns on capital. The fund maintains concentrated exposure to these value opportunities across international markets.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The fund demonstrates moderate-high conviction through concentrated positioning in named holdings like Unicredit, Meg Energy, and the new Roche position. Top ten holdings represent significant portfolio weights, and managers express clear views on sector opportunities, though some hedging language is present.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The managers express caution about market expectations, stating that investors are praying for low inflation and rates but will have trouble finding them. They warn that stock investors and market operators are anchored in the past and not being pragmatic about the new environment.

Risk Appetite

25%

DefensiveAggressive

Defensive (25%)

The fund added a new position in Roche and maintains concentrated exposure to energy and banking. While selective, they are deploying capital into what they view as attractive opportunities with low valuations.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

The fund added one new position in Roche during the quarter, indicating selective deployment. However, no cash level changes are disclosed and the activity appears limited to this single addition, suggesting modest net deployment.

Forward Guidance

0%

CautiousExpansionary

Cautious (0%)

The managers present a balanced view of future actions, advocating for pragmatic positioning in energy and banking while warning about structural challenges. No clear directional deployment bias is expressed.

Language Signal

45%

BearishBullish

Balanced (45%)

Language is mixed with opportunity-focused terms around energy and banking balanced by risk language about inflation, government spending challenges, and warnings about market expectations being unrealistic.

Perceived Risk

55%

Low RiskElevated

Moderate Risk (55%)

Managers identify specific risks including government spending creating pricing issues, coal sector pressures from Chinese demand weakness, and structural challenges for central banks. Risk discussion is meaningful but not alarmist.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

Managers see selective opportunities in energy and banking sectors with low valuations, but emphasize the need for pragmatic positioning. The addition of only one new name suggests a somewhat constrained opportunity set requiring selectivity.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The managers discuss structural economic changes and higher natural rates as a new paradigm, suggesting a multi-year view. They reference Roche's return on equity continuing to compound over time, indicating a patient, long-term investment approach.