Smead Capital's $4.8B Anti-AI Portfolio: 27.5% Housing, Zero Magnificent Seven, and a 15.5x P/E vs the Market's 27.7x

While the S&P 500 trades at 27.7x earnings and AI euphoria drives record multiples in technology, Smead Capital Management just filed its Q4 2025 13F revealing a $4.8 billion portfolio with just 2.2% in tech — a single position in Qualcomm (QCOM). Instead, Bill Smead has concentrated 27.5% of the fund in housing and real estate, 20.6% in financials, and 19.5% in energy. The portfolio trades at 15.5x earnings — a 44% discount to the S&P 500. According to Smead, that level of P/E discount has only occurred three times in the past decade, and each time it preceded double-digit outperformance.

TL;DR — Key Takeaways

• AUM: $4,819.1M (down 6.9% from $5,176.4M in Q3 2025), well below the $7,010M peak in Q3 2024
• Holdings: 32 positions (down from 34 in Q3), consistent with Smead's 25-30 target range
• Zero AI exposure: Only tech holding is Qualcomm (QCOM) at 2.2% — no NVIDIA, no Microsoft, no Meta
• Massive P/E discount: 15.5x vs S&P 500 at 27.7x and Russell 1000 Value at 20.9x
• Exits: Sold Devon Energy (DVN) ($51.8M) and Ovintiv (OVV) ($139.7M) entirely
• Doubled down on banks: Fifth Third Bancorp (FITB) shares increased 100% (1.63M to 3.25M shares)
• Housing overweight: SPG + MAC + DHI + LEN + NVR + HD = $1,326M = 27.5% of portfolio
• Historical precedent: Prior P/E discounts of this magnitude (2015, 2020, 2022) led to 13-27pp alpha over subsequent periods
• Top holding: Simon Property Group (SPG) at $331.6M (6.9%) — a mall REIT, not a tech stock

Filing Snapshot

Metric	Q4 2025	Q3 2025	Change
Total AUM	$4,819.1M	$5,176.4M	-6.9%
Holdings Count	32	34	-2
Report Date	Dec 31, 2025	Sep 30, 2025	—
Filing Date	Feb 9, 2026	—	—
WhaleScore	66.75	—	—
Portfolio P/E	15.5x	—	—
S&P 500 P/E	27.7x	—	—

Top 10 Holdings — Where Smead's Billions Are Concentrated

The top 10 positions account for over 51% of the portfolio, and not a single one is a technology company. The biggest position is a mall REIT, followed by a pharma giant and a credit card company. This is not what most institutional portfolios look like in 2026.

Simon Property Group (SPG) leads at $331.6M (6.9%), a bet on premium retail real estate at a time when e-commerce growth has decelerated. Merck (MRK) at $298.8M (6.2%) and Amgen (AMGN) at $262.4M (5.4%) represent the healthcare pillar — both trading at single-digit P/E discounts to the market. American Express (AXP) at $284.3M (5.9%) is the premium financial play, while Cenovus Energy (CVE) at $283.6M (5.9%) anchors the energy allocation as a Canadian integrated oil producer.

The homebuilder trio — D.R. Horton (DHI) at $247.7M, Lennar (LEN) at $187.3M, and NVR (NVR) at $180.5M — collectively represent $615.5M or 12.8% of the portfolio. Smead has described housing as a "generationally overlooked opportunity" driven by millennial household formation and chronic underbuilding since 2008.

Sector Breakdown — The Anti-Consensus Allocation

Smead Capital's sector allocation reads like an inversion of the Nasdaq 100. Where most large institutional portfolios have 30-40% in technology and communications, Smead has just 2.2%. Where most are underweight real estate and energy, Smead is massively overweight both.

Housing & Real Estate (27.5% — $1,326M): This is the fund's largest sector bet, combining mall REITs (SPG, Macerich (MAC)), homebuilders (DHI, LEN, NVR), and home improvement (Home Depot (HD)). The thesis rests on millennial demographics, housing undersupply, and mean-reversion in REIT valuations.

Financials (20.6% — $991M): A mix of mega-cap banks (JPMorgan (JPM), Bank of America (BAC)), premium financial services (AXP), and regional banks (FITB, Western Alliance (WAL), M&T Bank (MTB)). The FITB doubling signals strong conviction in the regional bank recovery thesis.

Energy (19.5% — $941M): Smead maintains heavy energy exposure through CVE, APA Corp (APA), Diamondback Energy (FANG), ConocoPhillips (COP), and Occidental Petroleum (OXY). The DVN and OVV exits suggest portfolio refinement rather than sector retreat — Smead kept higher-conviction energy names while trimming lower-conviction ones.

Healthcare (13.8% — $663M): Merck, Amgen, and UnitedHealth (UNH) form a pharma-plus-insurance triad. UNH was the featured stock in Smead's Q4 webcast.

Consumer (11.4% — $547M): eBay (EBAY), Target (TGT), Ulta Beauty (ULTA), Crocs (CROX), and U-Haul. These are contrarian consumer picks — names that institutional investors have largely abandoned.

Technology (2.2% — $107M): Just Qualcomm. In a market where the Magnificent Seven represent over 30% of the S&P 500, Smead owns zero of them. This is the single most contrarian allocation decision in the portfolio.

AUM Trajectory — From $7B Peak to $4.8B

Smead Capital's AUM has declined 31% from its Q3 2024 peak of $7,010M to the current $4,819M. The trajectory tells a story of a value manager swimming against a powerful growth tide:

The fund grew explosively from $2,272M in Q1 2021 to $7,010M by Q3 2024 — a period when value stocks briefly outperformed. But as AI mania took hold and growth stocks resumed leadership, Smead's AUM contracted through a combination of performance drag and potential outflows. The 6.9% QoQ decline from Q3 to Q4 2025 reflects both market-driven markdowns in housing and energy names and the opportunity cost of zero AI exposure.

For context, the S&P 500 was roughly flat in Q4 2025, while Smead's fund returned +0.30% — outperforming the index but continuing the AUM bleed from the peak. The question is whether this contraction sets up the same kind of mean-reversion opportunity that followed previous drawdowns.

What Changed in Q4 — Exits, Doubles, and Adds

Exits: Devon Energy and Ovintiv

Smead exited two energy positions entirely: Devon Energy (DVN) (previously $51.8M) and Ovintiv (OVV) (previously $139.7M). Combined, these represented $191.5M or 3.7% of the Q3 portfolio. The exits reduced holdings from 34 to 32 and narrowed the energy allocation — but Smead kept the higher-quality energy names (CVE, FANG, COP, APA, OXY), suggesting this was about portfolio quality, not a sector call.

Doubled: Fifth Third Bancorp

Fifth Third Bancorp (FITB) saw the most dramatic change: shares doubled from 1.63M to 3.25M, pushing the position value from $72.4M to $152.1M. This is a strong conviction signal. Fifth Third is a Cincinnati-based regional bank that Smead has identified as a beneficiary of the re-steepening yield curve and commercial lending recovery. A 100% share increase in a single quarter is rare for Smead's typically low-turnover portfolio.

Adds: Western Alliance and ConocoPhillips

Western Alliance (WAL) grew from $115.6M to $130.9M, continuing the regional bank theme. ConocoPhillips (COP) increased from $165.9M to $179.5M (1.75M to 1.92M shares), a modest add to an existing energy position.

The Contrarian Thesis — Why Smead Thinks the Market Is Wrong

In his Q4 webcast titled "Dealing with Stock Market Extremes" and "Overlooked Opportunities," Bill Smead laid out the core argument: the market is making a historic concentration error in technology, and the mean-reversion trade is in housing, energy, and financials.

The data point he emphasizes most: the portfolio's 15.5x P/E vs. the S&P 500's 27.7x — a 44% discount. According to Smead, this level of P/E discount has only occurred three times in the past decade:

Year	Subsequent Performance	Alpha vs Benchmark
2015	+30%	+14pp
2020	+46%	+27pp
2022	+16%	+13pp

If the pattern holds, Smead's current positioning could generate significant alpha. The argument isn't that tech will crash — it's that the relative valuation gap between the sectors Smead owns and the sectors the market favors has reached historically unsustainable levels.

The housing thesis is particularly interesting: Smead argues that millennials (the largest generation in US history) are entering peak household formation years, that housing starts remain below replacement demand, and that homebuilder stocks trade at mid-single-digit P/E ratios despite secular tailwinds. Combined with mall REITs trading at steep discounts to NAV, Smead sees a "generational" opportunity in physical real estate.

Frequently Asked Questions

Why does Smead own zero AI or Magnificent Seven stocks?

Bill Smead's investment philosophy is built around eight criteria that emphasize durable competitive advantages, large addressable markets, and — critically — valuation discipline. Most AI and Magnificent Seven names trade at 25-50x earnings, far above Smead's comfort zone. The fund's 15.5x P/E vs. the market's 27.7x reflects this systematic avoidance of expensive growth stocks. Smead has argued that AI enthusiasm resembles prior manias (dotcom, nifty-fifty) and that the best returns come from owning what everyone else has abandoned.

Is the AUM decline a concern?

The 31% decline from the $7,010M peak (Q3 2024) to $4,819M reflects the challenge of being a value manager during a growth-led market. However, Smead's AUM was just $2,272M in Q1 2021, so even after the drawdown the fund has more than doubled over four years. Value managers historically see AUM contract during growth cycles and expand during value cycles — the AUM trajectory often lags performance by 12-18 months.

What's the significance of doubling Fifth Third Bancorp?

A 100% share increase in a single quarter is extremely unusual for Smead, which typically runs a low-turnover, 25-30 stock portfolio. This signals very high conviction in the regional bank recovery thesis. Fifth Third benefits from higher net interest margins as the yield curve normalizes, strong commercial lending in the Midwest, and a valuation that remains below pre-2023 banking crisis levels. The add also reinforces Smead's broader financials overweight at 20.6%.

Why exit Devon Energy and Ovintiv but keep other energy stocks?

Smead maintained positions in CVE, FANG, COP, APA, and OXY — suggesting the DVN and OVV exits were about company-specific factors rather than an energy sector call. Energy still represents 19.5% of the portfolio. The likely rationale: DVN and OVV had weaker free cash flow profiles relative to Smead's retained energy names, particularly after commodity price softness in late 2025.

How has the fund performed recently?

Smead Value Fund (SMVLX) returned +0.30% in Q4 2025, slightly outperforming the flat S&P 500. Key contributors were Merck, Amgen, and American Express. Key detractors were D.R. Horton, Lennar, and Home Depot — all housing names, which weighed on performance as mortgage rates remained elevated.

What would cause this portfolio to outperform?

Three catalysts could trigger outperformance: (1) a rotation from growth to value, possibly driven by tech earnings disappointments or AI capex rationalization; (2) declining mortgage rates, which would directly benefit homebuilders and REITs; and (3) a steepening yield curve favoring bank earnings. Smead's historical data suggests that P/E discounts of this magnitude (44% below S&P) have resolved in the value manager's favor within 12-24 months.