William Smead
Chief Executive Officer
Chief Investment Officer

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Dear Clients and Prospective Clients:

We are all being drowned in information each day. Most of this information has to do with the effect of the current economic contraction and the policies being used to turn things around. Since it seems that nobody wants to talk about wonderful companies, I’d thought we’d share some of Smead Capital Management’s opinions on the subject.

Here’s a list of some of the attributes of a wonderful company in our eyes:
1) High levels of profitability on invested capital with little or no leverage
2) Number one or two in the industry
3) Brand synonymous with product or industry
4) Transparency of management
5) Non-cyclical core business
6) High Barriers to entry (Strong Moat)

We could go on, but let me get to the point. In 29 years in the investment business we’ve learned that wealth is created by owning wonderful businesses for a long time and that your returns are enhanced if you get to buy them when their price is depressed. Usually the only time wonderful businesses get depressed in price is when the whole stock market goes way down and/or the economy contracts and provides short-term difficulty to even the strongest businesses.

We believe that three to five years from now people will look back and say, “What was I thinking about in late 2008 and early 2009 as I sat on low interest paying vehicles and didn’t add to existing holdings or use these bargains to get in somewhere around the ground floor?” Help us to help you!

Best Wishes,

William Smead

The information contained in this missive represents SCM’s opinions, and should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results. The securities identified and described in this missive do not represent all of the securities purchased or recommended for our clients. It should not be assumed that investing in these securities was or will be profitable. A list of all recommendations made by Smead Capital Management with in the past twelve month period is available upon request.

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