Bill Smead’s Top Picks for Oct. 7, 2026

Bill Smead, Founder, Chairman and CIO of Smead Capital Management

Focus: U.S. Value Stocks

Top Picks: Lennar, Cenovus Energy, Fifth Third Bancorp

MARKET OUTLOOK:

We remain convinced that the market’s obsession with a handful of mega-cap growth stocks is setting investors up for disappointment. History doesn’t repeat, but it rhymes, and we have seen this type of mania before. When everyone owns the same stocks for the same reasons, the risk isn’t in missing out, it’s in being last out.

Our conviction sits elsewhere: in durable, cash-generative businesses trading at reasonable prices, and in the millennial generation moving through its 30s and early 40s. This is the largest generation since the baby boomers, and it is now passing through the exact age range in which boomers drove the strongest stretch of U.S. economic growth in modern history. That is the age when people start families, and we expect that to keep supporting housing and housing-related demand for years, regardless of what the Fed does next.

We’d also point to energy. The market has left traditional oil and gas companies for dead while continuing to underinvest in future supply. Cheap valuations, strong free cash flow, and disciplined capital return make this sector more attractive than its reputation suggests.

Our advice to investors: resist the urge to chase what’s already worked. Warren Buffett built his fortune buying wonderful companies when they were unloved, not when they were crowded. We’d rather own cheap, profitable, dividend-paying businesses tied to demographic reality than pay nosebleed multiples for the next story stock.

Patience remains the scarcest commodity on Wall Street. We intend to keep using it to our clients’ advantage.

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TOP PICKS:

Lennar (LEN NYSE)

Lennar is one of the two largest homebuilders in the country, and the stock is trading at a discount that doesn’t reflect its long-term staying power. Shares are down roughly 25 per cent so far this year as soft affordability and weak consumer confidence pressure the whole sector, with incentives running above 14 per cent of sales price versus a more normal five per cent. But the balance sheet is excellent: book value near US$89 a share provides a floor, net debt is only about US$2 billion against a US$21 billion market value, and the company bought back eight per cent of its stock last fiscal year.

We believe Lennar should do really well over the next five to ten years as a national shortage of single-family homes and favorable demographics drive earnings and share price higher. We’ve also been watching consolidation accelerate across the sector. Four of the fifteen largest publicly traded homebuilders have been bought out in the last several months, including Taylor Morrison. Berkshire Hathaway, which already knows the homebuilding business through Clayton Homes, has taken a stake in Lennar itself. Margins are depressed now, but current weakness masks a business capable of far higher earnings once the operating environment normalizes.

Cenovus Energy (CVE TSX)

Cenovus is the largest oil position in both our U.S. and international portfolios, and it sits at the center of our thesis that commodities remain in the early-to-middle innings of a fifteen-to-thirty-year mean reversion against overvalued common stocks. The oil market is far tighter than the consensus narrative admits. Global inventories drawn down over the past year still need two to three years to rebuild even as demand keeps growing, and US$100 oil has not caused the demand destruction everyone predicted.

Cenovus is a disciplined integrated producer that also refines, which gives it a steadier earnings profile than pure upstream names, and it is growing production at highly profitable per-barrel economics rather than chasing volume the way producers did a decade ago. The company has become one of the larger cash generators in a market where very few businesses are actually throwing off free cash flow right now.

We think energy as a sector is still underowned, and that makes names like Cenovus, trading well below what the market is paying for scale and efficiency elsewhere in the group, an attractive place to stay patient. On the Athabasca deal, we like the business and the industry, we just don’t love giving up shares, and would prefer this as a cash deal.

Fifth Third Bancorp (FITB NYSE)

Fifth Third is a standout example of a regional bank executing well on consolidation. Its acquisition of Comerica is on track to remove roughly a billion dollars of overlapping cost structure as redundant branches and staff are eliminated, a clean and straightforward source of earnings growth.

Just as important is what Fifth Third isn’t: a bank heavily dependent on wealth management fee income. That matters because we think the stock market, and the advisory business built around it, is due for a reset as the AI-driven mania unwinds and money rotates out of the most concentrated parts of the index. Banks that lean less on wealth management should hold up better than peers when that happens.

We also see Fifth Third benefiting from the broader shift we expect as older investors move back into interest-bearing securities, which should eventually help bring long rates, and with them mortgage rates, back down.

In a banking sector where returns have been uneven, we like the combination of disciplined M&A execution and a less fee-dependent business model here.