May the 4th Be With You
Wall Street faced rising U.S.-China trade tensions and plunging oil prices today … again.
Seriously? Is it just me, or are the writers for this season of “Wall Street” quickly running out of ideas?
But, the real story of the day wasn’t falling oil prices or trade wars — or even the pandemic. It was the infamous Oracle of Omaha and his wild trading kingdom.
Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) held its annual shareholders’ meeting over the weekend … and let’s just say that you probably did better trading this market in the first quarter than Berkshire.
Wall-Street Yoda’s company reported a loss of $49.7 billion during the quarter driven by trading losses. In fact, Berkshire’s investment portfolio lost $54.5 billion. Sounds like Buffett could use a subscription to Great Stuff!
In the company’s defense, Berkshire holds a rather diversified portfolio of more than 90 companies ranging from insurance to utilities to furniture. All very exciting, I can tell you.
In case you were wondering, Berkshire’s biggest holdings lie in key American strongholds, such as Apple Inc. (Nasdaq: AAPL), Bank of America Corp. (NYSE: BAC) and American Express Co. (NYSE: AXP).
If you’re itching to report your own $54.5 billion loss, rush right out and buy these stocks now. Clearly, I’m joking … or am I?
The Takeaway:
Outside of Berkshire’s heavy trading losses, there was one other major takeaway from the company’s annual shareholder meeting. U.S. airlines are out.
Warren Buffett told investors at this weekend’s meeting that airlines, as Yoda would put it, not make one great.
Berkshire is done with the sector, selling its entire stakes in American Airlines Group Inc. (Nasdaq: AAL), United Airlines Holdings Inc. (Nasdaq: UAL), Southwest Airlines Co. (NYSE: LUV) and Delta Air Lines Inc. (NYSE: DAL).
The reasons for Berkshire’s exit are plane as day. The industry has seen a 95% drop in passengers and billions in losses. What’s more, airlines are rushing to take on mountains of new debt to fund operations and remain viable.
“Well, you have to pay that back out of earnings over some period of time,” Buffett told shareholders.
With talk of a resurgence of COVID-19 this fall, getting out of airline stocks now seems like a no-brainer. But then, we are taking investment advice from a company that lost $54.5 billion on its holdings in the first quarter.
If you’re more of a short-term trader than Buffett — and, let’s be honest, most of us are — then the airline sector might hold some opportunities for you following today’s 10% plunge across the board. Many of Berkshire’s former holdings are poised to finish off today’s lows.
Now, we all know Buffett has billions to play with. That $54.5 billion loss is pocket change to him … penny candy money, as we used to call it growing up.
If you’re looking for investment advice from someone who better understands your situation, look no further than Banyan Hill’s own Paul .
Paul isn’t messing around with those tumultuous airline stocks or any of the old, stodgy companies that a certain firm just lost billions on. No, sir! He knows that you want cutting-edge investments poised to lead America into the 2.0 promised land.
In fact, Paul just found one tech stock that’s set to transform the way we use and create energy: “This technology can single-handedly power a major American city … virtually free of charge.”
So, don’t get stuck in the past following bygone demagogues. Get with the 2.0 program and find out more about the one tech stock that Paul recommends you buy now.
Going: She May Not Look Like Much…
… But she’s got it where it counts, kid.
The Walt Disney Co. (NYSE: DIS) is set to enter the earnings confessional after the close tomorrow — and Michael Nathanson of research firm MoffettNathanson has a warning for DIS bulls. Earnings revisions are going to be “massively skewed to the downside,” Nathanson says. Despite all the hype surrounding Disney+, the new streaming service won’t make up for lost theme park revenue.
“The uncertainty of the present situation creates significant and unrivaled earnings risk for the foreseeable future,” Nathanson continued. He downgraded DIS to “neutral” from “buy” and cut his price target to $112 from $120.
I would like to note that $112 still represents about a 10% upside from DIS’s current levels. Still, Nathanson has a point. Great Stuff remains bullish on DIS, but fallout from the pandemic may not fully be priced into the shares, especially with the Disney+ hype.
That said, never tell me the odds! Any sharp sell-off from this week’s quarterly report could be a buying opportunity for DIS bulls.
Going: “Ample Supplies” of Beef
When “ample supplies” of beef is the best positive takeaway from an earnings report, you know you’ve got trouble.
Tyson Foods Inc. (NYSE: TSN) reported fiscal second-quarter earnings this morning, missing both top- and bottom-line expectations. Earnings missed Wall Street’s targets by $0.43 per share and revenue came up $750 million short.
Despite soaring demand at your local grocery stores for meat — seriously, what are y’all doing with all that hamburger? — the increase isn’t offsetting foodservice losses for Tyson.
However, Tyson said there was no need to worry about meat supplies … unless you’re a chicken. Cattle supplies are forecast to increase 2%, with pork up 5%. Chicken production, however, is expected to come in lower than projections for 3% to 4% growth. That should put a crimp in the chicken sandwich wars.
Today’s statement on “ample supplies” marks a complete 180 from Tyson’s earlier warning of a meat shortage due to processing plant closures. The sharp reversal certainly doesn’t engender confidence, and investors will want to hold off on TSN for now.
Gone: Intel Likes to Moovit, Moovit
Remember self-driving cars? Man, it seems we last talked about those a long, long time ago in a galaxy far, far away…
Intel Corp. (Nasdaq: INTC) hasn’t forgotten, however. The company is reportedly dropping about $1 billion on artificial intelligence (AI) startup Moovit.
Moovit uses AI and big data analytics to process and analyze traffic data. It then provides transit recommendations based on that analysis, reducing transportation times and costs.
You can see where Moovit’s operations would be extremely beneficial for any company building a self-driving car. Intel is reportedly adding Moovit to its Israeli automotive hub — you know, the one led by self-driving company Mobileye, which Intel shelled out $15.3 billion in 2017.
Neither Intel nor Moovit have commented on the deal, but, if it plays out, this would be a smart acquisition for Intel in the long run.
Today’s Chart of the Week once again comes courtesy of Earnings Whispers on Twitter.
Are you ready for another jampacked week of corporate earnings? I mean, just look at all the companies on tap to release their dirty financial details this week!
We’re going to keep a close eye on Disney (of course), but we’ve also got our eyes on Beyond Meat Inc. (Nasdaq: BYND), Shopify Inc. (NYSE: SHOP), Peloton Interactive Inc. (Nasdaq: PTON) and, of course, Roku Inc. (Nasdaq: ROKU).
Which company’s earnings report are you paying close attention to this week?
Let us know, and we might even add it to the mix! Drop us a line at GreatStuffToday@banyanhill.com.
Great Stuff: Don’t Make These Options Trading Mistakes!
If you’ve ever wondered what getting a bikini wax is like … try trading options during earnings season. (Or so I’m told, anyway.)
But some of us (myself included) are just gluttons for punishment. (That’s for options not … you know … anyway.) After all, trading options brings with it a bit of a rush … especially during earnings season.
I’ve traded options for more than 15 years, and there’s still nothing quite like having your research pay off, making that one trade ahead of an announcement and getting that big, sweet triple-digit payoff. It almost makes up for the many, many losses that came before it.
With that in mind, here are five “options don’ts” that could help save you a bit of skin when trading options:
- Don’t Trade Uneducated: Seriously, I cannot stress this one enough. If you don’t understand any of the terms or concepts below, take the time to learn them. Educate yourself. Trading options isn’t hard or all that complicated, but you need to know what you’re doing before you get started. Take a few minutes and read our “Great Stuff Special Edition: Options 101” and continue learning from there. You can thank me later.
- Don’t Buy Low Volume Options: What are low volume options? They are options with little to no open contracts, they typically have wide bid/ask spreads and they trade very infrequently. Because of this, your chances of making a profit are significantly reduced.
- Don’t Buy Low-Cost Options: Just because an option is priced attractively does not mean it is a good deal. If you’ve traded options before, I’m sure you’ve seen contracts that trade for pennies. There’s a reason for that — market makers don’t believe they will ever be profitable, and they are priced accordingly. You should probably trust their pricing on these options.
- Don’t Trade Near-Dated, OTM Options: Unless you really know what you’re doing (or are trading with a service you trust), trading near-dated, “out of the money” (OTM) options is a surefire way to lose money. Why? Because you need the underlying asset to move really far in a very short amount of time. Yeah, you nailed the direction on your TSN put, but the stock only fell to $55 … not $52, and now you’ve lost everything with no time to recover.
- Don’t Use Market Orders: Using a market order when placing an options trade puts you and your profits at the mercy of the open market. Sure, your trade will get filled, but at what price? Instead, use limit orders to specify the price you are willing to get in at. Doing so enables you to better manage your trade and realize the profit you planned for when you researched it. Your order might not get filled, but that can be a good thing. Research your trade again and adjust accordingly.
One final point of advice: You don’t have to make the journey into options trading alone. The great people at Banyan Hill are always here to help you along the way.
This market is crazy, and it can be scary to go at it alone. Whether you’re an options expert or a beginner, you can’t go wrong with Paul ’s research … even during earnings season. You see, Paul has a “rebound” method to spot opportunities when markets are irrational to the gills.
So, why not let Paul and his team do the heavy lifting and find opportunities for you?
That’s a wrap for today, but you can always catch us on social media: Facebook and Twitter. We hope you’re staying well out there!
Until next time, stay Great!
Regards,
Joseph Hargett
Editor, Great Stuff
