Bill Smead Bets on Main Street, Not Silicon Valley

Bill Smead Takes the Long View: Betting on America’s “Unloved” Sectors

When the AI-driven stock boom finally cools, veteran investor Bill Smead believes it won’t be tech titans that save portfolios — it’ll be Main Street America.

Smead, founder and CIO of Smead Capital Management and co-manager of the $4.5 billion Smead Value Fund (SMVLX), has built his career buying strong, durable businesses that have fallen deeply out of favor — and then simply waiting.

“We’re looking for businesses with consistent profits, solid balance sheets, and defendable market positions,” Smead told MarketWatch.

While tech continues to dominate headlines, Smead’s fund leans heavily into consumer discretionary and energy stocks, not AI darlings. Though the fund trails the Russell 1000 Value Index this year, its five- and ten-year returns still outperform.

Betting Against the “Racy Stuff”

A self-described value traditionalist since 1980, Smead doesn’t envy those chasing fast money. He’s skeptical of today’s AI exuberance, warning in his latest investor letter:

“Money is being spent building out AI capabilities like drunken sailors on leave.”

He expects the next decade to mirror the post-dot-com and post-GFC eras — a “lost decade” marked by two major bear markets. His plan? Avoid what will hurt most when those downturns hit.

Investing in Everyday America

Smead worries that when markets sour, baby boomers’ spending will shrink sharply. But his son and co-manager, Cole Smead, believes younger generations will keep the economy afloat.

The fund’s answer: invest in companies tied to average American consumers — not speculative tech.

Among its top holdings:

• D.R. Horton (DHI) and Lennar (LEN) – homebuilders Smead likens to “the Costco of housing,” but trading at a fraction of Costco’s valuation.
• Target (TGT) – a middle-America staple with loyal shoppers and strong margins. “Educated women go in for three things and come out with six,” Smead jokes.
• Merck (MRK) and Amgen (AMGN) – healthcare plays trading at deep discounts despite strong fundamentals.
• Diamondback Energy (FANG), Occidental (OXY), and ConocoPhillips (COP) – oil producers he believes will benefit as the Permian Basin slows and global supply tightens.

A Lone Tech Bet

Despite his skepticism, Smead isn’t entirely anti-tech. His fund holds Qualcomm (QCOM), a quiet outperformer generating 40–50% return on equity for a decade. “No one’s talking about them in AI, but that’s exactly why it’s cheap,” he said.

If Qualcomm grows earnings 10% annually over the next decade, Smead believes, it could be a spectacular long-term winner — proof that patience and value still pay off, even in an AI-crazed market.