Berkshire Hathaway Holdings Show Buffett Hunting a Big Elephant
Warren Buffett's Berkshire Hathaway holdings have undergone some major changes in the third quarter, according to the company's latest 13F filing.
Not only did Buffett and Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) sell more than $750 million in two American giants, they initiated four new holdings and eliminated three positions entirely. Overall, Berkshire's reported portfolio, which only includes long positions, increased to $75.3 billion for the quarter ended Sept. 30, up from $74.3 billion the previous quarter.
While some think Buffett is taking profits where he can, others think he is building up a stockpile of cash for a major move.
"Buffett may be selling the consumer stocks to provide more funds to his deputies while reserving money for a large acquisition," David Kass, a professor at the University of Maryland's Robert H. Smith School of Business, told Bloomberg News.
"He may be really wanting to keep that aside for his big elephant," said Kass, who is referring to Buffett's quote in a letter to shareholders last year where the 82-year-old investing legend stated, "Our elephant gun has been reloaded, and my trigger finger is itchy."
Only Buffett and Berkshire's new portfolio managers, Todd Combs and Ted Weschler, truly know why they made their latest moves, and so without further speculation, here they are.
Facebook Stock Rises Despite These 852 Million Reasons to Fall
It's difficult to think that an additional 852 million shares of Facebook stock hitting the market wouldn't weigh on the already struggling share price.
That's why, for the third time in nearly as many months, Facebook Inc. (Nasdaq: FB) on Wednesday braced for what could have been the largest selling spree yet to hit the social networking giant.
Scores of early investors and employees were at liberty to sell 778 million shares. Another 31 million in restricted stock, awarded to employees who joined the Menlo Park, CA-based company prior to 2011, were also unbound, along with 48 million shares held by former employees.
The staggering number is almost equal to Facebook's existing 921 million share float, according to data from the company's most current filing with the U.S. Securities and Exchange Commission.
But, a strange thing happened.
Why Home Depot Stock (NYSE: HD) Rallied While Homebuilders Fell
The Home Depot Inc. (NYSE: HD) reported third-quarter business results on Tuesday and its management cited improved housing demand for their solid sales and earnings growth, particularly in the U.S. market.
Similarly, homebuilders Beazer Homes USA Inc. (NYSE: BZH) and D. R. Horton Inc. (NYSE: DHI) reported fourth-quarter earnings Monday, which, according to each company's management, reflected a continued U.S. housing market recovery.
Despite improved earnings for fiscal 2012 and a positive outlook for fiscal 2013, shares of Beazer and D.R. Horton were off sharply in afternoon trading on Monday, with BZH down about 17% and DHI 6%. They recovered slightly by Tuesday afternoon.
Home Depot, on the other hand, has rallied sharply on Tuesday, hitting a new 12-year high and closing in on its all-time high of $70, set back in April 2000.
What accounts for the remarkable divergence between the homebuilders and Home Depot?
The answer comes down to comments made by Donald J. Tomnitz, Vice-Chairman, Chief Executive Officer, President and Member of the Executive Committee for D.R. Horton.
The Apple Stock Drop: What You Need to Know (Nasdaq: AAPL)
As Apple Inc. (Nasdaq: AAPL) stock continues its seven-week tumble, investors want to know what is likely to happen next.
Since hitting an all-time high of $702.10 on Sept. 19, Apple stock plunged $155.04 –more than 22% to close at $547.06 on Friday.
Investors have gotten little help from Wall Street analysts, who have offered diametrically opposed opinions on where AAPL is headed.
Among the prominent bears is Doubleline Capital CEO Jeff Gundlach, who predicted on Thursday that Apple stock would continue all the way down to $425. He said that's about where AAPL was when it started its dramatic climb in January, and he expects it to return to those levels.
Gundlach is down on Apple because he thinks the Cupertino, CA-based company's new products are no longer cutting edge.
"I'm really struck by this mini iPad thing as if that's any kind of a product innovation," Gundlach told CNBC."Once you just start changing the size of your products, I really think you're not exactly innovating."
Meanwhile, some Apple bulls insisted the stock will not only bounce back, but eventually will reach beyond $1,000 a share.
Brian White, an analyst with Topeka Capital Markets, said in a note to clients on Thursday that he's keeping his $1,111 price target on AAPL.
"We believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season," White wrote.
So which story are Apple investors to believe?
To figure that out, let's take a closer look at what's been going on.
Oil Prices Have Dipped, Just Don't Expect These Discounts to Last
Markets declined significantly in the wake of last Tuesday's Presidential election. In the two days that followed the S&P shed almost 3.6%.
But now the energy sector in general – and oil in particular – is poised for a major move up.
As I am writing this, six of the nine elements I regularly monitor to determine oil prices are pointing north.
The relationship between refinery margins (the difference between what it costs to produce oil products and the price that can be charged at the wholesale level – where the refiners make their profit) and inventory in gasoline are also indicating an oversold market, even without factoring in the East Coast double whammy of Hurricane Sandy and a Nor'easter.
The underlying dynamics, therefore, haven't changed. If left to its own devices, oil prices should be moving up (and our profits right along with it).
So why the dip?
The Fiscal Cliff is a Mole Hill Compared to This
Everyone is afraid of falling off the "fiscal cliff." But there's another dangerous countdown clock about hit to zero.
And no one is talking about it, even though it will spell even more financial problems for us all.
At midnight on December 31, 2012, the Transaction Account Guarantee (TAG) program will expire.
The TAG program was initiated at the height of the credit crisis when depositors were fleeing banks for fear they would go under.
To quell what was turning into a run on banks, the FDIC upped regular deposit insurance from $100,000 to $250,000 and under the TAG banner initiated unlimited insurance for all non-interest bearing transaction accounts.
It's the second part that's important because that's the piece that will soon come to an end.
When the unlimited insurance expires, corporations, businesses and depositors — whose soon- to- be- uninsured deposits, which total some $1.4 trillion, are likely to flee smaller banks — will rush into money market funds and seek the safety of short-term U.S. Treasuries.
This will create serious negative repercussions affecting our economic future.
How the Election Just Killed Investing in Coal Stocks
In the days following the re-election of President Obama, one particular stock sector seemed to suffer more than most: coal stocks.
The Market Vectors Coal ETF (NYSEARCA: KOL) was down 5% the day after the election and individual coal company stocks were hammered even more. The largest U.S. coal producer, Peabody Energy (NYSE: BTU), dropped by 9% while the second biggest U.S. producer of coal, Alpha Natural Resources (NYSE: ANR) fell by 12%.
The reason behind the declines is the perception in the market that President Obama's re-election will mean further onerous regulation for the beleaguered U.S. coal industry.
Lucas Pipes, an analyst at Brean Capital Carret & Co., told Bloomberg News, "The coal industry has seen increased regulatory oversight from the EPA on a number of issues under Obama's first term, such as stricter permitting requirements in Appalachia and new regulations for emission reductions at utilities."
Earlier this year, for instance, the EPA issued its Mercury and Air Toxics Standards Rule, which is set to go into effect Jan. 1, 2015. It sets strict emissions requirements on utilities.
According to a study from the consultancy Brattle Group, compliance with the rule would cost between $126 billion and $144 billion to retro-fit older coal-fired power plants. Brattle estimates this will lead to a shutdown by utilities of between 59 and 77 gigawatts of coal-fired electricity over the next five years.
This means that between 18.6% and 24.3% of U.S. power will no longer be generated by coal.
Basically, EPA regulations have made coal more expensive to burn. This will reduce coal demand even further as utilities switch to cheaper, cleaner-burning natural gas. Already the share of U.S. electricity supply coming from coal plants has fallen to its lowest level in almost 40 years.
At times this year, coal has lost its position as the country's biggest source of power, falling behind natural gas. Not surprising then that production from the U.S. coal industry has fallen 8% from 2008 to only 266 million tons in the first quarter of 2012.
Stock Market Today: Why the Sell-off Will Continue into 2013
The stock market today is trying to end the week positive, but fears concerning the fiscal cliff and what a second term for U.S. President Barack Obama means for the markets continue to grow.
Friday, the third day of trading since President Obama was re-elected, looks to be a volatile ending to a scary post-election market. Since the election, the Dow Jones is down more than 3.5%, the S&P 500 is down 3.7% and much of Wall Street thinks this sell-off will continue.
Analysts and CEOs predict the next year to be a very rough one for stocks and the economy, and there might be nothing the president can do to stop the slide.
"Economic prospects might not have been much different if Mitt Romney had won, especially as Congress remains divided. But the subsequent weakness in equities makes sense too," Julian Jessop, chief global economist at Capital Economics, said in a note to clients. "As we had anticipated, the focus has quickly moved on to the uncertainty over the 'fiscal cliff,' and perhaps back to the unsolved crisis in the euro-zone as well."
The Dirty Little Secret Behind Wal-Mart's Bluebird Cards
Here's something else that's got the potential to undermine our financial future…
It's about those prepaid cards, and the games that are being played with them that you may not know about.
Prepaid cards have lots of benefits, especially for the "unbanked."
These are the people who more or less may live paycheck to paycheck, or don't have jobs but need a "card" because both credit and debit cards are how we pay for most things these days.
A lot of people are rebelling, and rightfully so, against the higher and higher fees that banks are charging on checking accounts (and for all their other "services") and are turning to prepaid cards as an alternative means of paying for goods and services.
That's because back on November 10, 2008, at the height of the credit crisis, American Express had to become a bank (actually a bank holding company) so it could take money from the Federal Reserve to stay alive.
You forgot that, didn't you?