Donald Smith & Co Q1 2026 13F Holdings and Activity Report

I. Institutional Overview

Donald Smith & Co. represents a distinguished pillar in the world of institutional asset management, adhering to a rigorous and disciplined deep-value investment philosophy that traces its intellectual lineage back to the foundational principles of Benjamin Graham and David Dodd. As of the portfolio snapshot taken on March 31, 2026 , the institution manages a reported equity portfolio valued at approximately $5.56 billion . This scale positions the firm as a significant mid-sized institutional player, possessing enough capital to take meaningful positions in mid-cap and large-cap enterprises while maintaining the agility necessary to navigate niche market opportunities that larger, multi-trillion-dollar asset managers might overlook due to liquidity constraints.

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II. Sector Allocation Analysis

The 25.25% allocation to Materials is the second pillar of the portfolio. This is significantly higher than the sector's weight in broader market indices like the S&P 500, marking a major active bet. A deep dive into the underlying holdings reveals a heavy emphasis on gold mining and metals production. Value investors often turn to the Materials sector when they perceive that "hard assets" are being undervalued by a market obsessed with "soft" digital growth. This allocation serves two purposes: it acts as a potential hedge against inflationary pressures and provides exposure to companies with massive tangible assets (mines, reserves, and equipment) that are often priced at a fraction of their replacement cost.

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III. Top 10 Holdings Deep Dive

The institution slightly increased its share count by 2.20% this quarter, though the overall portfolio weight dropped from 8.3% to 7.78%. This weight decrease is likely due to the relative outperformance of other assets or a slight price consolidation in AER shares, rather than a desire to exit. The logic for holding AerCap is rooted in the recovery of global aviation and the massive "moat" created by its scale. As airlines prefer leasing over buying to preserve their own balance sheets, AerCap’s massive fleet of modern, fuel-efficient aircraft becomes increasingly valuable. For Donald Smith, AER likely represents a play on "tangible book value" that is still not fully recognized by the broader market despite its dominant industry position.

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IV. Major Buys/Additions

By committing over 4% of the total portfolio to a single new energy name, Donald Smith & Co. is signaling a major shift in its macro outlook. The timing suggests the firm believes that energy valuations have bottomed out relative to their cash-flow generation capabilities. SM Energy has a strong balance sheet and a track record of operational efficiency. For a deep-value investor, the attraction likely lies in the company's ability to generate massive free cash flow at current oil prices, which can be used for share buybacks or debt reduction—actions that directly increase the "tangible value" for shareholders.

These operations have significantly increased the "offensiveness" of the portfolio. By adding high-beta names in energy and specialty finance, the firm is positioning itself for a period of economic expansion. While this increases potential volatility, the "margin of safety" is maintained by the fact that these new targets still meet the firm's strict low-valuation criteria. The move into SM Energy and PennyMac, in particular, adds a layer of "growth at a reasonable price" to a portfolio that has traditionally been more focused on "deep value" assets.

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V. Major Sells and Exits

Civitas is an energy company focused on the DJ Basin and Permian Basin. Given that the firm simultaneously opened a massive position in SM Energy, the exit from CIVI should be viewed as a "relative value swap." Donald Smith & Co. likely concluded that Civitas had reached its valuation target or that its growth profile was no longer as attractive as SM Energy’s. By exiting entirely, the firm freed up significant capital to deploy into what it perceives as a higher-alpha opportunity in the same sector. This is "active rebalancing" at its most decisive.

The quality of this quarter's exit operations appears high. The institution is not "panic selling"; rather, it is "pruning the garden." By exiting names like Golar LNG (GLNG) and Global Ship Lease (GSL) , the firm is reducing its exposure to specific maritime and LNG infrastructure themes that may have become overvalued or face cyclical headwinds. The realization of over $460 million from these top exits and reductions provided the necessary "dry powder" for the aggressive buying spree detailed in Section IV.

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VI. Investment Insights and Risk Warnings

The Logic Chain Summary : 1. Sold : Matured energy (Civitas), underperforming gold (Equinox), and energy logistics (Golar LNG). 2. Why : To harvest gains and exit positions where the original value thesis had either been realized or compromised by operational friction. 3. Bought : High-cash-flow energy (SM Energy), mortgage servicing leaders (PennyMac), and undervalued specialty finance (Radian, Ally). 4. Why : To capture a "valuation re-rating" in sectors that benefit from economic resilience and higher interest rates, while maintaining a strict "margin of safety" through low price-to-tangible-book entries. 5. Result : A portfolio that is more "offensive" and "concentrated" in its macro-economic convictions than it was three months ago.

Institution-Specific Risks : Donald Smith & Co. operates with a specific mandate: deep value. Their willingness to hold "unpopular" stocks for a decade (like AerCap) requires a capital structure and client base that can withstand long periods of underperformance relative to growth-heavy indices. Individual investors attempting to mimic these moves must ensure their own liquidity needs and risk appetites align with such a "patient capital" approach.

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.