Hey Global Investor, here’s what you need to know before the US markets open.
Market Snapshot 📈
S&P 500 (Monday Close) 3,550.50 +41.06 (1.17%)
NASDAQ (Monday Close) 11,713.78 −181.45 (1.53%)
FTSE 100 (5 PM IST) 6279.82 +93.53 (1.51%)
NIFTY 50 (Today’s Close) 12,631.10 +170.05 (1.36%)
USDINR (5 PM IST) 74.24 (1 Year +3.73%)
Did Warren Buffett Find His Next “Value Investment”?
Berkshire Hathaway repurchased over $9B of its stock in Q3, taking the overall number to $16B for the year.
Background: Warren Buffett and Charlie Munger need no introduction. A couple of years ago, Berkshire authorized a buyback of its shares at any time chairman Warren Buffett and vice chairman Charlie Munger felt the stock is trading for a discount.
In search of an “elephant-sized” deal, Berkshire has invested in Japan’s five leading trading companies: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp. Later in September, the company participated in Snowflake’s IPO, investing $735M and notching up almost an $800M gain. During the pandemic, Berkshire sold its stake in major US airlines.
It seems like Warren Buffett might have just spotted that his next “elephant-sized” deal.
What Happened?: The $16B buyback is more than triple its last annual record. This amount eclipses Berkshire’s investment in Occidental Petroleum in 2019. It’s more than what the company has ever spent in a year purchasing its favorite stock – Apple.
The Wall Street consensus of $3.2B in buyback in Q3 turned out to be nowhere near the actual numbers.
The company reported an operating profit of $5.47B, down 32% from the year before. But Berkshire’s net earnings, which account for the company’s investments in the market, surged 82% on a Y-o-Y basis to $30.13B.
Buffett’s repurchase spree comes amid a tough time for its operations as the global economy struggles to recover from the coronavirus, directly impacting its wholly-owned businesses, including railroads, utilities, and insurance.
Even after the jumbo-sized repurchase, Berkshire reported cash reserves of $145.7B. If Buffett and his team think the stock is a bargain, this buyback won’t be the last.
Market Reaction: Berkshire Hathaway’s Class A shares are up nearly 20% in the Q3. However, the stock is still widely underperforming the S&P500 index this year. The stock has lost 8%, compared to a 10% total return for the S&P500.
Company Snapshot 📈
BRK.B $221.50 +12.65 (6.06%)
Analyst Rating (6 Ratings) BUY 50% HOLD 50% SELL 0%
- Vaccine Hopes: Pfizer COVID-19 vaccine could be given by the end of the year: Fauci (PFE +7.69%)
- Not Lovin’ It: Beyond Meat stock plummets more than 25% as COVID-19 takes bite out of earnings (BYND -4.05%)
- Who Needs Video Comm: Zoom Founder Drops $5 Billion as Vaccine Hits Covid Winners (ZM -17.37%)
- More Losses: Nikola’s Losses Widen as Executives Try to Regain Momentum, Develop First Truck (NKLA -4.85%)
Later Today 🕒
- Before Market Open: Advance Auto Parts Inc. (AAP)
- After Market Close: Datadog Inc (DDOG)
Fun Fact of The Day 🌞
If you search for “askew” in Google, the content will tilt slightly to the right.