Donald Smith & Co Q4 2025 13F Holdings and Activity Report

I. Institutional Overview

The psychological portrait of Donald Smith & Co. is one of extreme discipline and a refusal to succumb to market euphoria. In an era dominated by artificial intelligence, software-as-a-service, and digital transformation, this institution maintains a 0% allocation to the Technology sector . This is not a statistical error; it is a profound statement of investment philosophy. The firm operates on the "Graham and Dodd" principle of buying assets at a significant discount to their tangible book value or normalized earning power. Their portfolio is a fortress of "Old Economy" pillars—metals, mining, insurance, aircraft leasing, and homebuilding.

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II. Sector Allocation Analysis

While Materials remains a massive 27.51% of the portfolio, the activity this quarter shows a subtle shift. The institution has been trimming some of its most successful gold mining positions (like IAMGOLD and Equinox Gold) and moving capital into Consumer Discretionary (now 15.76%). This rotation suggests a tactical move from "defensive inflation hedges" (gold) toward "cyclical recovery plays" (motorcycles, hotels, and homebuilders). The increase in Consumer Discretionary exposure, particularly in unloved brands like Harley-Davidson (HOG), indicates a belief that the consumer is more resilient than the market fears, or that these specific companies have reached a valuation floor that is too attractive to ignore.

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III. Top 10 Holdings Deep Dive

AerCap is the quintessential Donald Smith & Co. holding. The firm has held this position for over 10 years, navigating the company through the COVID-19 pandemic and the subsequent recovery. As the world's largest aircraft lessor, AerCap benefits from the massive supply-demand imbalance in the aviation industry. Boeing and Airbus are struggling with production delays, making existing mid-life aircraft—which AerCap owns in abundance—incredibly valuable.

Portfolio Construction Logic : The top 10 is characterized by low P/E ratios, high tangible asset backing, and significant operating leverage . There is no "growth for growth's sake" here. Every company in the top 10 is a "cash flow machine" or an "asset play" that the market has, at various times, left for dead.

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IV. Major Buys/Additions

The most significant move this quarter was the initiation of a $91 million new position in West Fraser Timber. This is a classic "distressed reversal bet." The lumber industry has been decimated by high interest rates and a slowdown in housing starts. However, West Fraser is one of the lowest-cost producers in North America with a pristine balance sheet.

Risk-Return Assessment of Buys : These operations have increased the portfolio's offensiveness . By adding to timber, motorcycles, hotels, and fertilizers, Donald Smith & Co. is moving away from the "safety" of gold and into the "heat" of the economic cycle. They are betting that the market's fear of a recession is overblown, or that the "value" in these sectors provides a sufficient floor even if growth remains sluggish.

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V. Major Sells and Exits

If the "buys" represent the institution's offensive strategy, the "sells" represent their disciplined risk management and "harvesting" phase. Donald Smith & Co. is not afraid to exit a position entirely if the valuation no longer makes sense or if the original thesis has been compromised.

Capital Flow and Strategy Rotation : The "Sell" side of this report is dominated by Gold and Insurance . The firm recouped hundreds of millions of dollars from these winners. This capital was not returned to shareholders; it was immediately redeployed into the "Buys" analyzed in Section IV (Timber, Motorcycles, Lodging). This is a "Sell High, Buy Low" rotation in its purest form. They are selling the "inflation hedges" that have already worked and buying the "cyclical laggards" that the market is still afraid of.

This section shows only part of the complete report. View the app for the full analysis, position-level detail, and quarter-over-quarter tracking.

VI. Investment Insights and Risk Warnings

In a market obsessed with the "intangible"—algorithms, cloud computing, and AI—this institution has built a fortress of "tangible" assets. Their logic chain is clear: 1. Harvest the Hedges : Sell the gold miners (EQX, IAG) and the insurance giants (UNM) that have benefited from the recent macro environment. 2. Deploy into Distress : Move that capital into sectors that are currently "hated" but fundamentally essential—Lumber (WFG), Iconic Brands (HOG), and Physical Infrastructure (Lodging/REITs). 3. Maintain the Anchor : Keep the massive position in Aircraft Leasing (AER) as the primary engine of long-term value.

The unique insight here is the firm’s absolute refusal to participate in the technology sector . This is not just a "value" play; it is a "contrarian macro" play. They are betting that the next decade will be defined by the "Physical Economy"—where the constraints of production, transportation, and raw materials will create more value than digital innovation. For retail investors, the reference value here is the discipline of the "Exit." Seeing a firm sell 65% of a winning position like Equinox Gold is a powerful reminder that "profit is only real when you take it."

This section shows only part of the complete report. View the app for the full analysis, position-level detail, and quarter-over-quarter tracking.

Sources and limitations

This report uses public U.S. Securities and Exchange Commission Form 13F disclosures and structured data maintained by 13F Hub. A 13F filing is a quarter-end snapshot of reportable long positions, is normally published with a delay, and does not disclose every short position, cash balance, bond, derivative, or non-U.S. asset.

Narrative content is prepared from the same-period SEC disclosure and 13F Hub structured data, then checked before publication. This material is for research and education, not personalized investment advice.