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Did Buffett Sell Wells Fargo?, Going the Distance

Did Buffett Sell Wells Fargo?, Going the Distance

Published

4 years ago

on

Wednesday, August 12, 2020
Volume 1, Issue 35

Did Buffett Sell Wells Fargo?

Berkshire Hathaway reported second quarter results over the weekend and I sent out a special issue of the newsletter on Sunday to discuss various aspects of the earnings release. The market seems to be reacting to the results positively, with Berkshire shares trading higher on Monday and Tuesday. 

One aspect of the report not discussed in the Sunday newsletter is the apparent sale of equity holdings in the “banks, insurance, and finance” category. As we can see from the exhibit below taken from the second quarter 10-Q report, Berkshire’s cost basis in the “banks, insurance, and finance” category has dropped from $40,419 million as of December 31, 2019 to $31,164 million as of June 30, 2020 (the figure was $40,845 million as of March 31, 2020 based on the first quarter 10-Q):

Regular readers of Berkshire’s financial statements will also note that Berkshire now lists the “big four” as American Express, Apple, Bank of America, and Coca-Cola.  In the first quarter, this note referred to five securities, not four, with Wells Fargo included in the list. This has led to speculation among Berkshire shareholders that Warren Buffett has sold Berkshire’s holdings in Wells Fargo.

Wells Fargo shares closed at $28.70 on March 31 and fell to $25.60 on June 30, trading between a high of $33.91 and a low of $22 during the quarter.

It is possible that a sale of part or all of the Wells Fargo stake accounts for part of the drop in the cost basis of the “banks, insurance, and finance” category. The following table from the 2019 annual report shows the cost basis of Wells Fargo as well as other large holdings:

Wells Fargo’s cost basis is roughly $7 billion, but Berkshire also has large holdings in other banks including BNY Mellon, JPMorgan Chase, and U.S. Bancorp. We know that Berkshire has added to its stake in Bank of America recently so the sales are obviously not a reduction in the BofA holding. 

Berkshire is expected to file its 13-F report with the SEC later this week which will show its equity holdings as of June 30, 2020. We will have to wait for that report to be released for definitive answers regarding what was sold in the “bank, insurance and finance” group during the second quarter. I recommend using the dataroma.com website to monitor the 13-F filings of Berkshire.

Going the Distance

Starting out too quickly in a marathon is a classic beginner’s error. The adrenaline rush of the starting line, a rested body, and watching others start off strong can conspire to accelerate your pace beyond the level that can be sustained. Exceeding your physical capacity at the start of a 26.2 mile race can have dire consequences toward the end. Decisions related to personal finance can resemble marathon running. To go the distance, you must pace yourself and ignore those who seem to be passing you by during the first few miles.  If you remain disciplined, chances are good that you will pass them later in the race.

Read Going the Distance on The Rational Walk

Interesting Links

Time for Thinking by Howard Marks, August 5, 2020. Marks surveys the current scene more than a month after his last memo, The Anatomy of a Rally, published on June 18. His latest memo covers the current state of the COVID pandemic, whether the economy is likely to experience a “V shaped recovery”, and the sustainability of the Federal Reserve’s current set of policies. (Oaktree)

Calpers CIO Resigns After Less Than Two Years, Missing Return Targets by Katrina Nicholas, August 5, 2020. Ben Meng resigned as chief investment officer of the California Public Employees Retirement System after less than two years in the role and less than two months after he published an article outlining his plan to invest in private equity and credit on a leveraged basis to meet the 7% return target the fund needs to satisfy obligations. (Bloomberg)

Doris Buffett, Her Family’s ‘Retail Philanthropist,’ Dies at 92 by Sam Roberts, August 4, 2020. “Her younger brother, Warren, entrusted her with vetting requests after he announced his intention to donate nearly his entire fortune. “Warren loves to make money and I love to give it away,” she said.” Doris Buffett ran the Sunshine Lady Foundation and, more recently, The Letters Foundation which she founded with her brother. (NY Times)

The Sweet Spot by Mr. Money Mustache, August 4, 2020. “Success can get you to the top of a beautiful cliff, but then propel you right over the edge of it.” Overachievers need to be careful to not go beyond the “sweet spot” where additional success can lead to a lower quality of life. (Mr. Money Mustache)

Do You Know the Difference Between Being Rich and Being Wealthy? by Jason Zweig, August 8, 2020.  Jason Zweig reviews The Psychology of Money, a book by Morgan Housel that will be released in September. I often link to Housel’s blog posts (see below) and plan to review his book in the fall. (WSJ)

What Always Changes by Morgan Housel, August 5, 2020. “Investment facts are always changing. But prediction is doubly hard because the facts investors care about and pay attention to – which is what makes facts relevant – change all the time. Not just by industry, but for the market as a whole.” (Collaborative Fund)

How Tim Cook Made Apple His Own by Tripp Mickle, August 8, 2020. “The industrial engineer has turned Steve Jobs’s creation into a corporate colossus, delivering one of the most lucrative business successions in history” (WSJ)

From Class Rooms to Class Zooms: Teaching during COVID times! by Aswath Damodaran, August 5, 2020. Professor Damodaran writes about teaching during the pandemic, the value proposition of higher education, and his efforts to provide free instructions to students online. (Musings on Markets)

The Value Guys Podcast July 20, 2020. I heard about The Value Guys when Geoff Gannon mentioned them on one of his recent Focused Compounding podcasts. The Value Guys are industry veterans who talk about stocks anonymously. Episode 308 is interesting because the first twenty minutes are devoted to explaining the grueling career path of Wall Street analysts. 

How to Have the Best Week Ever by Ryan Holiday, August 5, 2020. Holiday applies timeless wisdom from Marcus Aurelius, Seneca, Epictetus to help us improve each day of the upcoming week. (RyanHoliday.net)

Mount Corcoran by Albert Bierstadt

Mount Corcoran by Albert Bierstadt, c. 1876-1877 (National Gallery of Art)

According to the National Gallery of Art, Albert Bierstadt was the “first artist to use his European training to translate field studies into expansive paintings celebrating western American grandeur.” The peak he named Mount Corcoran is today known as Mount Langley, located at 14,032 feet in the Southern Sierra Nevada mountain range of California. The painting was initially met with a hostile reception when it was displayed in 1877. Apparently many on the east coast who saw it didn’t think the scene could be one based on a real mountain. 

If you missed last week’s issue of Rational Reflections or would like to read the back-issues, please visit the newsletter archive. 

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Nothing in this newsletter constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  

Your privacy is taken very seriously. No email addresses or any other subscribers information is ever sold or provided to third parties. If you choose to unsubscribe at any time, you will no longer receive any further communications of any kind.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway which is mentioned in this issue of Rational Reflections.

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

Published

13 hours ago

on

March 12, 2024

By

They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com. 

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

More Tech Stocks:

Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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Major typhoid fever surveillance study in sub-Saharan Africa indicates need for the introduction of typhoid conjugate vaccines in endemic countries

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high…

Published

14 hours ago

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March 12, 2024

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There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

Credit: IVI

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

 

The findings from this 4-year study, the Severe Typhoid in Africa (SETA) program, offers new typhoid fever burden estimates from six countries: Burkina Faso, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Madagascar, and Nigeria, with four countries recording more than 100 cases for every 100,000 person-years of observation, which is considered a high burden. The highest incidence of typhoid was found in DRC with 315 cases per 100,000 people while children between 2-14 years of age were shown to be at highest risk across all 25 study sites.

 

There are an estimated 12.5 to 16.3 million cases of typhoid every year with 140,000 deaths. However, with generic symptoms such as fever, fatigue, and abdominal pain, and the need for blood culture sampling to make a definitive diagnosis, it is difficult for governments to capture the true burden of typhoid in their countries.

 

“Our goal through SETA was to address these gaps in typhoid disease burden data,” said lead author Dr. Florian Marks, Deputy Director General of the International Vaccine Institute (IVI). “Our estimates indicate that introduction of TCV in endemic settings would go to lengths in protecting communities, especially school-aged children, against this potentially deadly—but preventable—disease.”

 

In addition to disease incidence, this study also showed that the emergence of antimicrobial resistance (AMR) in Salmonella Typhi, the bacteria that causes typhoid fever, has led to more reliance beyond the traditional first line of antibiotic treatment. If left untreated, severe cases of the disease can lead to intestinal perforation and even death. This suggests that prevention through vaccination may play a critical role in not only protecting against typhoid fever but reducing the spread of drug-resistant strains of the bacteria.

 

There are two TCVs prequalified by the World Health Organization (WHO) and available through Gavi, the Vaccine Alliance. In February 2024, IVI and SK bioscience announced that a third TCV, SKYTyphoid™, also achieved WHO PQ, paving the way for public procurement and increasing the global supply.

 

Alongside the SETA disease burden study, IVI has been working with colleagues in three African countries to show the real-world impact of TCV vaccination. These studies include a cluster-randomized trial in Agogo, Ghana and two effectiveness studies following mass vaccination in Kisantu, DRC and Imerintsiatosika, Madagascar.

 

Dr. Birkneh Tilahun Tadesse, Associate Director General at IVI and Head of the Real-World Evidence Department, explains, “Through these vaccine effectiveness studies, we aim to show the full public health value of TCV in settings that are directly impacted by a high burden of typhoid fever.” He adds, “Our final objective of course is to eliminate typhoid or to at least reduce the burden to low incidence levels, and that’s what we are attempting in Fiji with an island-wide vaccination campaign.”

 

As more countries in typhoid endemic countries, namely in sub-Saharan Africa and South Asia, consider TCV in national immunization programs, these data will help inform evidence-based policy decisions around typhoid prevention and control.

 

###

 

About the International Vaccine Institute (IVI)
The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO) and developed a new-generation typhoid conjugate vaccine that is recently pre-qualified by WHO.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, a Country Office in Austria, and Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit https://www.ivi.int.

 

CONTACT

Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 | aerie.em@ivi.int

Journal

The Lancet Global Health

Method of Research

Observational study

Subject of Research

People

Article Title

Incidence of typhoid fever in Burkina Faso, Democratic Republic of the Congo, Ethiopia, Ghana, Madagascar, and Nigeria (the Severe Typhoid in Africa programme): a population-based study

Article Publication Date

12-Mar-2024

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US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

Earlier today, CNBC’s…

Published

15 hours ago

on

March 12, 2024

By

US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever... And Debt Explodes

Earlier today, CNBC's Brian Sullivan took a horse dose of Red Pills when, about six months after our readers, he learned that the US is issuing $1 trillion in debt every 100 days, which prompted him to rage tweet, (or rageX, not sure what the proper term is here) the following:

We’ve added 60% to national debt since 2018. Germany - a country with major economic woes - added ‘just’ 32%.   

Maybe it will never matter.   Maybe MMT is real.   Maybe we just cancel or inflate it out. Maybe career real estate borrowers or career politicians aren’t the answer.

I have no idea.  Only time will tell.   But it’s going to be fascinating to watch it play out.

He is right: it will be fascinating, and the latest budget deficit data simply confirmed that the day of reckoning will come very soon, certainly sooner than the two years that One River's Eric Peters predicted this weekend for the coming "US debt sustainability crisis."

According to the US Treasury, in February, the US collected $271 billion in various tax receipts, and spent $567 billion, more than double what it collected.

The two charts below show the divergence in US tax receipts which have flatlined (on a trailing 6M basis) since the covid pandemic in 2020 (with occasional stimmy-driven surges)...

... and spending which is about 50% higher compared to where it was in 2020.

The end result is that in February, the budget deficit rose to $296.3 billion, up 12.9% from a year prior, and the second highest February deficit on record.

And the punchline: on a cumulative basis, the budget deficit in fiscal 2024 which began on October 1, 2023 is now $828 billion, the second largest cumulative deficit through February on record, surpassed only by the peak covid year of 2021.

But wait there's more: because in a world where the US is spending more than twice what it is collecting, the endgame is clear: debt collapse, and while it won't be tomorrow, or the week after, it is coming... and it's also why the US is now selling $1 trillion in debt every 100 days just to keep operating (and absorbing all those millions of illegal immigrants who will keep voting democrat to preserve the socialist system of the US, so beloved by the Soros clan).

And it gets even worse, because we are now in the ponzi finance stage of the Minsky cycle, with total interest on the debt annualizing well above $1 trillion, and rising every day

... having already surpassed total US defense spending and soon to surpass total health spending and, finally all social security spending, the largest spending category of all, which means that US debt will now rise exponentially higher until the inevitable moment when the US dollar loses its reserve status and it all comes crashing down.

We conclude with another observation by CNBC's Brian Sullivan, who quotes an email by a DC strategist...

.. which lays out the proposed Biden budget as follows:

The budget deficit will growth another $16 TRILLION over next 10 years. Thats *with* the proposed massive tax hikes.

Without them the deficit will grow $19 trillion.

That's why you will hear the "deficit is being reduced by $3 trillion" over the decade.

No family budget or business could exist with this kind of math.

Of course, in the long run, neither can the US... and since neither party will ever cut the spending which everyone by now is so addicted to, the best anyone can do is start planning for the endgame.

Tyler Durden Tue, 03/12/2024 - 18:40

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