If you summarize Warren Buffett's recent letter to shareholders, you will find that he was acting on a famous saying, which is to be fearful when others are greedy, and greedy when others are fearful. He said in italics that there was no possibility of a “no” for eye-catching performance because he had essentially sworn off any large acquisition, due to size constraints as well as competition for private equity and venture capital deals.
Christopher Blumstran, co-owner of the $477 million investment firm Semper Augustus Investments, is a longtime Berkshire Hathaway BRK.B.
Baraka.A,
An investor with nearly a third of his assets in the Omaha, Nebraska, conglomerate.
This makes Blumstran an indirect major investor in Apple AAPL,
See how the tech giant is the number one holding company in Berkshire Hathaway's portfolio.
“We favor a more flexible capital policy, where we buy stocks when they are cheap and send special dividends to shareholders when they are not,” Blumstran says in his 149-page letter to investors, referring to Apple's “massive” stock buybacks. “. Revenue growth has slowed to 1% annually over the past two years.
“If sales growth fails to recover to at least 7% annually, the multiple will almost certainly shrink from 30.0x today. In my opinion, Apple is worth far less than its $3 trillion valuation based on $400 billion of slow-growing sales.” Which produces profits of just over $100 billion.
Granted, Berkshire Hathaway's cost basis per Apple share in the fourth quarter was $35.39 — well below the current price of $182.52.
The bulk of Blumstran's letter is dedicated to Berkshire Hathaway.
Berkshire Hathaway is undervalued, Blumstran says. He says the rest of Berkshire Hathaway's investment portfolio outside of Apple is undervalued, but that's not why he owns the stock.
“Berkshire's common stock portfolio is too big to run in circles against the S&P 500 anymore,” he says. “The advantage of a stock portfolio is that it is a stock portfolio. The degree of over-capitalization in Berkshire's insurance operation allows ownership of a much larger allocation to common stock (and even to an entire railroad now and then).”
Since Berkshire buys companies with consistent and growing earnings power and does not overpay, its dividend yields are often higher than the yields on bonds in which other insurance companies invest. “It grows and funnels excess capital into Omaha to invest throughout the empire.”
Blumstran estimates that Berkshire is likely to earn between 10% and 12% on its shares over a decade, and buy back a “significant” number of shares at a price between 120% and 150% of its book value. “If the stock is trading at a mid-teens multiple (which is 14.2x today), the investor is getting a low double-digit return,” he says.
Markets
US stock futures ES00,
NQ00,
They were flat after a 1.7% rise in the S&P 500 SPX last week, which posted its 13th record close of the year.
|
Performance of key assets |
last |
5d |
1 m |
YTD |
1y |
|
Standard & Poor's 500 |
5,088.80 |
1.66% |
3.26% |
6.69% |
27.79% |
|
Nasdaq Composite |
15,996.82 |
1.40% |
3.50% |
6.56% |
40.39% |
|
10 year treasury |
4.246 |
-3.80 |
16.74 |
36.52 |
32.81 |
|
gold |
2,042.10 |
0.82% |
0.46% |
-1.43% |
11.94% |
|
oil |
76.15 |
-2.67% |
-1.08% |
6.76% |
0.54% |
|
Data: Market Monitor. The change in Treasury yields expressed in basis points |
|||||
Buzz
New Home Sales data is due, the first indicator for the week that will see the Personal Consumption Expenditures Price Index on Thursday and the ISM Manufacturing Index on Friday. There is a $63 billion auction for 2-year bonds and a $64 billion auction for 5-year bonds.
LUNR Intuitive Machines Stock,
It fell back when the Odysseus lunar lander fell on its side.
Profits are accrued from Domino's DPZ,
Dillard DDS,
After the closure, Zoom Communications ZM,
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Highest indicators
There were the most active stock market indicators as of 6 a.m. ET.
|
tape |
Security name |
|
ran out, |
Nvidia |
|
TSLA, |
Tesla |
|
Loner, |
Intuitive machines |
|
New, |
New |
|
Camel, |
apple |
|
AMD, |
Advanced micro devices |
|
imc, |
AMC Entertainment |
|
Amzan, |
Amazon.com |
|
Belter, |
Palantir Technologies |
|
tsm, |
Taiwan Semiconductor Co., Ltd |
Chart
There may be a bumpy road ahead, says Torsten Slok, chief economist at private equity giant Apollo Global Management. As the Fed continues its quantitative tightening program, the level of reserve repurchase agreements may reach zero in May or June. “The concern is that once there are no longer abundant reserves in the banking sector, reserves will be scarce, and the consequences could be reduced support for T-bills, duration, and credit markets, or pressures in money markets similar to what we are now in,” says Slok. “We saw in September 2019″.
Random readings
The $100 bill is the most common currency in America – good luck trying to use it.
Financing was not secured for a bakery that had a $6,000 pie order canceled by a Tesla employee.
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