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If I had to grade this weekend’s "Woodstock of Capitalism" – aka the Berkshire Hathaway annual meeting – I would slap it with a solid B.
Was this Buffett’s most headline-grabbing annual meeting? I have listened to/watched enough of these spectacles in the past decade to say emphatically: No. Personally, I liked his annual meeting in the middle of the COVID-19 pandemic as he sought to rally the world.
Sure, Buffett railed against Wall Street (he hates paying fees to bankers, as seen once more in the Allegheny deal) by saying it’s a “gambling parlor” and bitcoin for it offering nothing of value. He scared the hell out of everyone (again) on potential nuclear war. Charlie Munger flipped the bird to Robinhood (more on that below).
But all of this felt very stale to me, just vintage Buffett and Munger. I would compare it to comedian Andrew Dice Clay going to his bag of nursery rhyme jokes to please long-time fans – they are proven winning lines. So from a headline standpoint, I give the annual meeting a solid C (tough grader I know, but whatever).
Where Buffett earned his A grade, however, was in the investing wisdom he imparted on the crowd. Nothing new per se, rather great reminders one day after the Dow Jones Industrial tanked 900 points and the Nasdaq Composite fell 4%.
Here are three lessons Buffett served up:
1. Do Your Research
Buffett’s explanation on how he upped his stake in Occidental Petroleum to 14% of the company, underscored the need to do your own research and make it extensive if possible. Buffett saw 60% of the top holders in Occidental being no more than passive investors unlikely to take advantage of a dislocation in the stock price. So, Buffett saw that passiveness and a dislocation in the stock price, and went to work buying up everyone else’s shares not in that 60% group. Savvy.
2. Buy When Others Are Fearful
Falling markets haven’t deterred Buffett. In fact, this is the perfect environment for him…and it could be for you as well, provided you can have a time horizon of more than one-day. Buffett spent $51 billion to buy stocks in the first quarter, notably HP, Chevron and the aforementioned Occidental.
Ask yourself this question this morning: What would Warren Buffett be doing after Friday’s big down day in the markets? The answer is probably not preparing for a stock market crash because a free newsletter is warning of one (not this one of course). No, Buffett is probably licking his chops as names he is watching have just gotten cheaper.
3. Buy Stock of Companies You Understand
Buffett mentioned he doesn’t know how to use email and has documents printed out for him. With that context, is it any surprise Buffett became the largest shareholder in printer maker HP in the first quarter? Nope. Meanwhile, Buffett has a unique view of demand for fossil fuels by way of his ownership of railroad Burlington Northern (and his other industrial companies). Is it any shock he's been plowing billions into Chevron and Occidental? Nope.
Bottom line is Buffett has long purchased stocks of companies he understands. It’s a wise course of action for you as well. If you don’t understand what that $2 biotech stock you just bought really does, why are you buying it?
Mesh the grades together, you get my solid B. Till next year Warren and Charlie (hopefully).
Odds & Ends
Trash talking: Charlie Munger didn’t show his age (98) when wasting no time ripping Robinhood a new one at the celebration of two billionaire investors. "Wasn't that pretty obvious that something like that was going to happen?" Munger said after bringing up Robinhood's business troubles, later adding the company's business model "was disgusting... God is getting just. ... There's been some justice."
About seven hours after the comment, Robinhood’s head of public policy communications sent me this statement via email: “It is tiresome witnessing Mr. Munger mischaracterize a platform and customer base he knows nothing about. [No, Robinhood doesn’t charge commissions and does not allow day trading or short selling. We never did.] He should just say what he really means: unless you look, think, and act like him, you cannot and should not be an investor. We’re happy to share our educational tools, as it also seems he is lost on digital currencies.”
Maybe a touch of age-shaming in the crypto reference? You be the judge. Somehow I don’t think Munger will be invited on as a Robinhood board advisor anytime soon. But maybe he should: Robinhood’s stock has crashed 72% since hitting public markets in July 2021.
Thanks for nothing, Amazon: If Amazon’s first quarter loss were excluded, the S&P 500 would currently be sitting on double-digit percentage profit growth to start the year, points out FactSet. Including Amazon’s loss, the S&P 500’s first quarter earnings growth rate stands at 7.1% compared to 10.1% if Amazon were excluded.
On another note, my co-anchor Julie Hyman and I got into a fiery debate on live TV on whether Amazon will raise prices on Prime again to help offset inflation. Julie says no, I say it’s going to $200 a year by the middle of next year. One Wall Street analyst we spoke with thinks Amazon Prime is really worth $400 a year (at least). I am curious on your hot take on this one – drop us a tweet at @juleshyman, @briansozzi and @yahoofinance.
Stock stuff: Lots of interesting individual stock stories are on tap this week. Take for instance Restaurant Brands, which is holding a Tim Horton’s investor day on May 3. It’s not the norm for a company of Restaurant Brands’ size to hold an investor day for just one of its brands (others it owns include Burger King, Firehouse Subs and Popeyes).
However, I think CEO Jose Cil doesn’t think Tim Horton’s turnaround is getting appreciated by investors, hence the showcase of the brand. I do think this could be a signal Restaurant Brands is open to spinning out the division in some form and reinvesting proceeds in faster growing concepts.
It will also be interesting to see the market reception to Bausch & Lomb’s IPO on May 6. The company is nicely profitable, is a consumer staple (contact lenses which you need if you wear them…like I do) and has strong leadership.
Anything other than a positive response, given these favorable investing characteristics, would be another major red flag on the broader market’s near-term direction.
Starbucks CEO Howard Schultz better bring his oratory A-game on the company’s May 3 earnings call. The stock has cratered 18% in the past month – basically encompassing his time back as CEO of the coffee giant. I would expect a challenging quarter from Starbucks, notably in its key market of China due to COVID-19 lockdowns.
But the stock’s recent performance reflects more than challenges in the business – it reflects a view Schultz is another tone deaf, fat cat CEO who doesn’t understand the current real-world challenges facing his non-HQ workforce. Schultz has to do a better job here, his listening tours so far have been a social media nightmare for him.
Yahoo Finance Trending Tickers to Watch: It’s a big morning for all things touched by Warren Buffett on the Trending Tickers page. Chevron seeing a lot of interest as Buffett upped his stake in the oil giant. Buffett disclosed a 9.5% arbitrage stake in Activision Blizzard, and its stock is seeing strong interest on our platform.
Not much news on HP from the Buffett event, other than the fact he owns the stock and prefers printed documents because he doesn’t know how to email. Occidental Petroleum received more praise from Buffett, and finds itself on our list.
Robinhood is on the trending ticker page not for anything good, but because Charlie Munger gave the trading platform a middle finger (again) at the shareholder’s meeting.
China-based EV makers Nio and Xpeng — volatile names that are usually on the Trending Ticker pages — are back on this morning as traders assess sales updates from each. Nio said early Sunday it delivered 5,044 vehicles in April, down from 9,985 in March.
“In late March and April 2022, the Company’s vehicle production and delivery have been impacted by the supply chain volatilities and other constraints caused by a new wave of the COVID-19 outbreaks in certain regions in China. The vehicle production has been recovering gradually,” Nio said. Watch for a negative reaction in Tesla shares off these sales updates.
What to watch today
9:45 a.m. ET: S&P Global U.S. Manufacturing PMI, April (59.7 expected, 59.7 in prior print)
10:00 a.m. ET: Construction spending, month-over-month, March (0.8% expected, 0.5% in February)
10:00 a.m. ET: ISM Manufacturing, April (57.7 expected, 57.1 in March)
10:00 a.m. ET: ISM Prices Paid, April (87.1 in March)
10:00 a.m. ET: ISM New Orders, April (53.8 in March)
10:00 a.m. ET: ISM Employment (56.3. in March)
7:00 a.m. ET: Moody's Corp. (MCO) is expected to report adjusted earnings of $2.91 per share on revenue of $1.51 billion
8:00 a.m. ET: ON Semiconductor Corp. (ON) is expected to report adjusted earnings of $1.05 per share on revenue of $1.91 billion
4:00 p.m. ET: Diamondback Energy (FANG) is expected to report adjusted earnings of $4.67 per share on revenue of $1.98 billion
4:00 p.m. ET: Expedia (EXPE) is expected to report adjusted losses of 38 cents per share on revenue of $2.24 billion
4:05 p.m. ET: Devon Energy (DVN) is expected to report adjusted earnings of $1.76 per share on revenue of $3.78 billion
4:05 p.m. ET: Avis Budget Group (CAR) is expected to report adjusted earnings of $3.26 per share on revenue of $2.17 billion
4:05 p.m. ET: Chegg (CHGG) is expected to report adjusted earnings of 24 cents per share on revenue of $203.08 million
4:05 p.m. ET: ZoomInfo Technologies (ZI) is expected to report adjusted earnings of 15 cents per share on revenue of $227.67 million
4:10 p.m. ET: Clorox (CLX) is expected to report adjusted earnings of 93 cents per share on revenue of $1.79 billion
4:15 p.m. ET: MGM Resorts International (MGM) is expected to report adjusted losses of 10 cents per share on revenue. of $2.78 billion
Yahoo Finance's coverage of the 2022 Berkshire Hathaway annual sharehodlers meeting