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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Trailing the Russell 1000 Value Index (+2.61%) and the S&P 500 (+2.30%) amid narrow, mega-cap-led market strength."
For the third quarter of 2026, the Smead Value Fund (SMVLX) produced a return of 1.53%, underperforming both the S&P 500 Index (2.30%) and the Russell 1000 Value Index (2.61%). Performance was driven positively by Cenovus Energy, APA Corp, and Merck & Co., as geopolitical tensions highlighted the value of long-life energy assets and Merck advanced late-stage lung cancer therapies to address Keytruda's upcoming 2028 patent expiration. Conversely, mall REITs Macerich and Simon Property Group, along with homebuilder D.R. Horton, were the quarter's primary detractors due to interest rate headwinds, though management reiterates that current rates reflect historical norms and emphasize the strong replacement-cost protections and foot-traffic demand supporting mall properties. In their commentary titled 'Breaking the Fever,' portfolio managers Bill Smead and Cole Smead compare current market conditions—characterized by massive AI-driven capital expenditures, high fiscal deficits, and extreme market concentration—to prior euphoric peaks where market 'Generals' marched while the underlying breadth deteriorated. Reaffirming their concentrated, valuation-disciplined strategy, the managers refuse to chase high-multiple growth equities, positioning instead in companies with robust current free cash flows and tangible asset backing that are poised to outperform when speculative fever cools.
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