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1 week ago
Why Investors are Betting Big on Berkshire Hathaway Class B Shares Right Now
By: Karl Montevirgen | June 26, 2024
• Berkshire Hathaway Class B shares are poised for an explosive breakout
• Fundamentally, BRK/B has been a consistent outperformer and is diversified among different sectors
• BRK/B is working its way through a symmetrical triangle formation and could breakout in either direction
Berkshire Hathaway needs no introduction. The name is synonymous with two iconic investors—Warren Buffett (the Oracle of Omaha) and the late Charlie Munger.
Currently, Berkshire's Class B shares (BRK/B) appear to be hovering at a tense standstill, poised for a major breakout either upward or downward. The shares are midpoint at a narrowing symmetrical triangle pattern. Which way is it likely to break? And is it still a worthy investment?
Why Buy Berkshire Hathaway Shares?
Here are four reasons:
1— Berkshire Hathaway tends to beat the S&P 500 over 90% of the time. In the image below, StockCharts' PerfCharts illustrates BRK/B's relative performance against the broader market.
CHART 1. PERFCHART COMPARING BRK/B TO THE S&P 500. The definition of outperformance?
2— BRK/B provides instant diversification in sectors (though not weightings). Still, the company's holdings in insurance, utilities, energy, transportation, and consumer goods are well-thought and managed (it's Warren Buffett, after all).
3— The company is loaded with cash. This is a big deal: if the market crashes, Berkshire Hathaway has plenty of ammo to take advantage of buying value stocks at a low price while everyone on Wall Street is panicking.
4— Share prices are still reasonably valued. Its P/B ratio is 1.55; you can view this using StockCharts' Symbol Summary.
Looking Back 20 Years
BRK/B may not have the most impressive SCTR score (68.5), but again, looking back over 20 years, it has averaged around the 60 range. Still, its uptrend has been nothing less than impressive.
Looking at a weekly chart, its relative performance against the S&P 500 ($SPX) shows a consistent beat, save for the years leading up to the 2008 financial crisis and the 2000 Dot.com bubble (not shown on the chart).
CHART 2. 20-YEAR WEEKLY CHART OF BRK/B. Note that not all mediocre SCTR readings indicate mediocre performance.
Is BRK/B Poised for an Explosive Move?
Take a look at BRK/B's daily chart (see below).
CHART 3. DAILY CHART OF BRK/B. It appears as if BRK/B shares are poised for an explosive move. Still, triangle formations can go either way; the trick to getting the odds in your favor is to look at the buying or selling pressure leading to the anticipated breakout.
Currently, BRK/B is working its way through a symmetrical triangle formation, which, according to Edwards and Magee in Technical Analysis of Stock Trends (1948), suggests that roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals. Still, the direction of price movement in triangle patterns is uncertain until a breakout occurs. The breakout will provide confirmation of the potential price direction.
But if you look at the momentum leading up to the anticipated breakout, the signs are bullish, as both the Chaikin Money Flow and Accumulation/Distribution Line indicate that buying pressure is on the rise.
Whether you go long following an upside breakout or before it takes place, a few points below the bottom of the triangle formation at $395 serves as a good stop loss level, as it also marks the most recent swing low. If price falls below that level, the next "technical" support level will likely be in the $370 range.
The Takeaway
Berkshire Hathaway Class B shares (BRK/B) have a lot going for them, making them a solid buy for many investors. The stock often outpaces the S&P 500, provides robust diversification, the company has ample cash reserves, and its current valuation is attractive. While the stock's near-term movement is uncertain as it navigates a symmetrical triangle pattern, momentum suggests a positive breakout could be on the horizon. But it all boils down to this: would you bet in favor of or against the Oracle of Omaha?
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1 week ago
>>> Warren Buffett Just Bought $435 Million of This Stock and Plans to Hold It Forever
by Adam Levy
The Motley Fool
Jun 26, 2024
https://finance.yahoo.com/news/warren-buffett-just-bought-435-085000603.html
Lately, there aren't a lot of stocks Warren Buffett has found interesting enough to add to Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) $385 billion portfolio. Buffett, through Berkshire, has made only a handful of purchases during the current bull market.
Truth be told, Buffett has sold more stocks than he's bought in each of the last six quarters. Some of his biggest sales last quarter included a portion of his top holding, Apple, as well as all of Berkshire's position in Paramount Global stock and the rest of Berkshire's stake in HP. But he's been consistently adding to some positions in 2024, including one of his biggest holdings.
So far in June, Buffett spent another $435 million on Occidental Petroleum (NYSE: OXY) to make it Berkshire's sixth-largest position.
More recent Securities and Exchange Commission filings reveal purchases of Occidental Petroleum between June 5 and June 17. Buffett has been snapping up shares of Occidental when it trades around $60 per share, and investors may want to follow his lead.
A stock Buffett plans to hold forever
Buffett originally invested in Occidental in 2019, when he purchased $10 billion of preferred shares directly from the company for Berkshire Hathaway. That $10 billion investment helped finance Occidental's acquisition of Anadarko, strengthening its position in the Permian Basin.
While that acquisition left Occidental laden with debt just ahead of a tough period for the energy market that nobody could have predicted (the COVID-19 pandemic), management admirably navigated through the challenging environment. It suspended its dividend and strategically sold off assets to deleverage its balance sheet, and it's once again on solid footing.
Buffett has since added to his position in Occidental. With the most recent $435 million purchase, Berkshire Hathaway now owns about 28.8% of shares outstanding -- a stake worth about $15.9 billion. It also still owns about $8.5 billion of preferred shares, which include warrants to buy more of the company's common stock at $59.62 a share (it currently trades around $62.90).
In his most recent letter to Berkshire shareholders, Buffett praised Occidental CEO Vicki Hollub, saying the energy stock is a holding he plans to maintain indefinitely. "Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners," Buffett wrote. "We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives."
Occidental will add to its leading position in the Permian Basin this year with its $12 billion acquisition of CrownRock, which is set to close in the third quarter. Hollub will likely follow the same playbook as with the much larger Anadarko acquisition, selling off non-essential assets to reduce the amount of debt on Occidental's balance sheet. It's already exploring a sale of Permian assets worth over $1 billion, according to a report from Reuters in May.
A big bet on oil prices
While Occidental is an integrated energy company, the bulk of its revenue and income comes from drilling. It's in the business of acquiring land and separating oil from rock. That means that its profits depend heavily on the price of oil.
When it announced the CrownRock acquisition at the end of last year, it estimated it could generate an additional $1 billion in annual free cash flow assuming oil prices remain above $70 per barrel.
Hollub now expects oil prices to remain in the $80 to $85 range through 2025. Oil prices took a hit after the members of OPEC+ agreed earlier this month to a plan that would extend their production cuts into 2025, but that would also allow eight member nations to start easing back from their voluntary cuts beginning in October. However, crude prices quickly recovered to around $80.
Buffett took the opportunity to buy Occidental when oil prices came down, and he has already benefited from the slight recovery. Even if oil prices remain relatively stable, Occidental is well-positioned to generate significant cash flow for its shareholders.
Should investors follow Buffett's lead?
As mentioned, Buffett is buying Occidental shares practically any time they dip below $60. At that price, the stock trades at around 14 times forward earnings. That puts it firmly in the value stock territory, but it's not as attractive a valuation as some other oil producers and integrated energy companies carry.
But Occidental, under Hollub, is far more aggressive at growing its bottom line via acquisition and cost-cutting. That could result in far better profit growth over the long run, especially if oil prices consistently move higher. Her strategy brings with it considerable risk, but it also comes with much more potential growth in the long run. In the meantime, the company is certainly stable enough, generating plenty of cash to continue growing its operations while paying a nice dividend.
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DiscoverGold
2 months ago
Warren Buffett's company rejects proposals, but it faces lawsuit over how it handled one last year
By: Yahoo | May 4, 2024
OMAHA, Neb. (AP) — Shareholder proposals are usually uneventful at Berkshire Hathaway's annual meeting. But Warren Buffett and the company are now facing a lawsuit over the way one presenter was treated last year.
Peter Flaherty with the National Legal and Policy Center came back with another proposal this year on a different subject even after he was cut off in the middle of his presentation last year and arrested for trespassing. The charges were later dropped, but Flaherty decided to sue because of the way he was treated to stand up for any shareholder who wants to bring a proposal. He said he had never had trouble at dozens of meetings he has presented at since 2005, including Berkshire’s 2022 meeting.
“I’ve never been interrupted while making a shareholder presentation. I’ve never had my mic cut, and I’ve never been removed from a meeting room. And I’ve certainly never been arrested,” Flaherty said, “Those things were unprecedented for me.”
The issue last year was that Flaherty questioned the character of one of Buffett's best friends and a former Berkshire board member, Bill Gates. Flaherty suggested that Buffett's close association with Gates could hurt Berkshire's reputation because of reports that Gates had been associated with Jeffrey Epstein before he was arrested for sex trafficking. So he was proposing that Berkshire give someone else Buffett's chairman title while leaving him as CEO.
Buffett has donated billions to Gates’ foundation over the years and plans to give him the bulk of his fortune to distribute.
Berkshire didn't immediately respond to the federal lawsuit that was filed Friday, and it wasn't mentioned during Saturday's meeting. Berkshire officials didn't even address any of the proposals during the meeting — instead they relied on their statements of opposition that were filed in the official meeting proxy.
Buffett stayed silent during the business meeting after spending all day Saturday answering shareholder questions at the main part of the shareholder meeting. He let his eventual successor Vice Chairman Greg Abel take the lead. He only reminded the presenters of all six proposals to keep their comments related to the proposals.
Flaherty’s proposal was one of six rejected at Berkshire’s meeting this year. They were all opposed by the board, and Buffett still controls roughly one-third of the vote so anything he opposes is almost certain to fail. None of the proposals received more than 85,000 votes. Flaherty’s proposal only drew 6,150 votes while getting 443,544 votes against it.
Some of the other proposals rejected Saturday included ones to require Berkshire to create reports on climate change risks and diversity and inclusion efforts at the massive conglomerate. Another proposal would have required Berkshire to create a board committee focused on railroad safety.
The safety chief for the SMART-TD rail union that represents conductors and other rail workers, Jared Cassity, said that if BNSF wants to argue that safety is the railroad's top priority, Berkshire's board should focus on it and review staffing and operational practices to help prevent derailments like the disastrous one Norfolk Southern had last year in East Palestine, Ohio.
“Railroad safety requires effective board oversight,” Cassity said.
Berkshire argued that BNSF is already focused on improving safety and doesn't need more oversight.
With regard to the other proposals, Berkshire officials argued that such reports would be cumbersome because of the decentralized way the company is run and unnecessary. Plus, some of its subsidiaries like its massive utility unit already produce reports on greenhouse gas emissions, Berkshire said.
This year, Flaherty was allowed to make his case that Berkshire should produce a report on the risks of doing business in China, before the proposal was summarily rejected.
“China poses unique risks for Berkshire Hathaway,” Flaherty said, arguing that the company's existing disclosures about subsidiaries like Fruit of the Loom that have factories in China are inadequate.
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DiscoverGold
2 months ago
What's Next for Berkshire Hathaway
By: Barron's | April 26, 2024
With CEO Warren Buffett, 93, headed for the end of his reign, questions are swirling about the company's future. The case for buying the stock now. By Andrew Bary
Warren Buffett will be at center stage, as usual, during Berkshire Hathaway's annual meeting. But investors are increasingly looking for clues on what the company will be like when the longstanding CEO and chairman is no longer running it.
Berkshire could come under pressure to break itself up when the world's most acclaimed investor exits the stage. It might decide to pay a dividend rather than amass cash, as it does today while Buffett, 93, waits for investing opportunities. Buffett can expect to face questions on all these topics and more at the annual meeting on May 4 in Omaha, Neb.
Charlie Munger, Warren Buffett's longtime friend, business partner, and Berkshire vice chairman, who died last year at 99, won't be at his side. Munger's absence will only reinforce the obvious: Buffett's time atop the conglomerate he built over six decades could end during the next few years. Even Buffett acknowledges as much, writing in November that he felt "good" but was "playing in extra innings."
For some 30,000 Berkshire shareholders expected to attend the meeting, the future will be the focus as Buffett fields questions for more than five hours in what could be his only public appearance of the year. Joining Buffett on the dais will be Vice Chairman Greg Abel, 61, likely tasked with the role of Buffett's successor as CEO, and Vice Chairman Ajit Jain, 72, who runs the company's insurance operations. Together they will answer questions small and large: Can the stock beat the S&P 500 index? Why have share repurchases declined since 2021? Can the company's new management prove anywhere as capable as Buffett? Should Berkshire break up?
But really, everyone will be focused on the same thing.
"Whether it's said out loud or not, succession is front and center on the minds of investors," says Cathy Seifert, a CFRA Research analyst.
There is nothing like Berkshire. It has had an extraordinary run since Buffett took control of a struggling textile maker in 1965 and turned it into the world's largest conglomerate, with nearly 400,000 employees and U.S.-centric businesses that offer one of the best reads on the health of the economy. Some of its largest divisions are the Burlington Northern Santa Fe railroad; Berkshire Hathaway Energy, which operates a multistate electric utility business that is one of the largest producers of green power in the country; and the world's biggest property and casualty insurer, including Geico, the No. 3 auto insurer.
There are smaller units, such as NetJets, the leader in private jet travel; Clayton Homes, the top maker of manufactured housing; Benjamin Moore paints; Dairy Queen; and one of the largest real estate brokerage businesses in the country. Then there is a $360 billion equity portfolio led by Apple, which accounts for about 40% of Berkshire's holdings. There also is what Buffett calls a Fort Knox balance sheet, with nearly $170 billion in cash and equivalents.
Berkshire isn't run like other conglomerates. It is unusually decentralized, with Buffett leaving key decisions at subsidiaries largely to the managers of the individual companies. He wrote in the Berkshire "Owner's Manual" in 2017 that "we delegate almost to the point of abdication." Berkshire has a tiny headquarters staff of 26 with no corporate counsel, investor relations, or public relations staff.
Berkshire's unusual strategy has worked. The company is expected to generate $40 billion of after-tax operating earnings this year and has a market capitalization of $880 billion, the seventh-largest in the stock market. The company's Class A stock has risen to over $600,000 a share from $20 (there have been no stock splits along the way) since Buffett took over in 1965, and holders who bought the now widely held Class B shares when they were created in 1996 have seen that stock rise 20-fold. It's one of the most widely held stocks by individuals, with some three million shareholders. Probably no other company elicits the passion and loyalty of its investor base. Big institutions have never appreciated the stock as much as individuals.
But will they continue to, once Buffett is no longer running the show? So central is Buffett to Berkshire's business that four or five people will take over the role that he maintained until 2018, when he delegated responsibility for Berkshire's non-insurance businesses to Abel and the insurance operations to Jain.
Abel is due to become CEO, which involves overseeing Berkshire's vast array of businesses and likely determining capital allocation, a critical role at the company that Buffett has performed so well for nearly 60 years. That means deciding whether to use earnings to repurchase stock, pay dividends, build cash, or make acquisitions. Jain is likely to remain head of the insurance business, while Buffett's older son, Howard, 69, a farmer and philanthropist, probably will become nonexecutive chairman.
Then there are Todd Combs, 53, and Ted Weschler, 61, who now run about 10% of Berkshire's equity investments and probably will run the entire portfolio. Berkshire doesn't say which stocks in the equity portfolio are run by Combs and Weschler, but Berkshire watchers think that many of the smaller holdings — under $4 billion — are theirs. These include Charter Communications, DaVita, Liberty Sirius XM, Amazon.com, Snowflake, Visa, and Mastercard. Buffett hasn't commented on their performance relative to the market since 2019 — when he said they were slightly behind it since joining the company more than a decade ago. We estimate that both are probably lagging behind the market since their tenures began, given the underperformance of some of their rumored holdings in recent years.
Investment manager Bill Smead, who heads the Smead Value fund, would like to hear from Combs and Weschler. "Not introducing Todd and Ted is an unforgivable sin. If Warren dies tomorrow, they are the stockpickers, and they have never answered or been asked a question at the annual meeting."
Combs is a key member of the Berkshire bench and could be a backup to Abel as the Buffett successor or a potential successor to Abel as CEO. Combs has a good rapport with Buffett and has experience beyond investments as CEO of Geico for past four years and as a JPMorgan Chase board member. One candidate to succeed Jain as head of the insurance operations is Joe Brandon, who runs Alleghany, an insurer that Berkshire bought in 2022.
Buffett's three children, Howard, Susan, and Peter, will be in the mix after Buffett's death since they will oversee a charitable trust that will hold Buffett's now 15% economic stake in Berkshire, which has voting power of over 30% because it consists almost entirely of supervoting A shares. The Buffett stake will allow the children to wield considerable power, at least for several years, as the trust will liquidate over about a decade.
While Buffett acknowledges that he has slowed down in recent years, he looked sharp at the 2023 meeting. He talked for five hours, fortified with a Coke and peanut brittle from See's Candies, a Berkshire company. He showed command of all things Berkshire, the economy, and financial markets, both past and present. He is the last of a breed. Three years ago, there were four Berkshire directors age 90 or over — all longtime friends of Buffett — and they all are dead: Munger, David "Sandy" Gottesman, Tom Murphy, and Walter Scott. Smead says that without the outspoken Munger to prod him, Buffett may be more restrained at this year's meeting.
That won't stop investors from peppering him with questions. How long do you expect to run the company? What do Berkshire's slowing stock repurchases say about your views on the stock? Can Geico, which has slipped behind Progressive in auto insurance market share and technology, catch up? Would Berkshire walk away from its Western utilities and let them go bankrupt in the face of wildfire liabilities? Do you think it will make sense to pay a dividend once you're gone?
Buffett says he expects tough questions. "That's the way we like it," he wrote earlier this year.
"There will be more discussion of the possibility of a dividend at some point in time," says Ted Bridges, CEO of Bridges Trust, an Omaha investment manager. Buffett has conceded that buying public and private businesses is tough now, given higher valuations. And Berkshire handicaps itself by refusing to participate in corporate auctions. The dividend issue arouses passion among many individual Berkshire holders who don't want them, in part for tax reasons.
An important question, asked or not, is what will happen to Berkshire shares when Buffett steps down or dies. They may take a hit of perhaps 5% to 10%, as longtime holders cash out and investors worry that the Buffett magic will disappear. Buffett, though, has said he thinks the stock will go up on the day after his death as investors anticipate a value-enhancing corporate breakup.
There's a case to be made for a breakup. It's the world's biggest conglomerate at a time when conglomerates have fallen out of favor, with the likes of General Electric and United Technologies having broken up in recent years. For all of Buffett's investment acumen and business smarts, Berkshire stock is about even with the S&P 500 as measured by total return over the past 10 years and 20 years, Bloomberg calculations show. The stock has returned 12.4% annually over the past 10 years, against 12.5% for the S&P 500. Buffett has said that Berkshire needs to top it over time or investors should consider looking elsewhere.
All the massive outperformance came in Buffett's first 40 years at the helm, when the company was smaller and Buffett had a particularly hot investment hand, scooping up big stakes in companies like Coca-Cola and American Express at cheap prices. Size, too, is an impediment to outsize returns.
Buffett hasn't had a lot of new winners in the past decade. The company's largest acquisition — the 2016 purchase of Precision Castparts for $33 billion — has been a bust. Buffett has had some misses in the stock market, selling a group of financial stocks including Wells Fargo and JPMorgan Chase in 2020 and 2021 at about half their current prices. Of course, Apple has been a huge win with Berkshire's stake, now worth over $150 billion, compared with a cost of around $30 billion. But the iPhone giant is having a rough 2024, and its stock is down more than10% year to date.
Berkshire shares look like a good bet to match or beat the S&P 500 even after Buffett leaves the scene. The stock now looks appealing, valued at 1.5 times its projected March 31 book value of nearly $400,000 per Class A share and for 22 times estimated 2024 earnings. (Berkshire is due to report its first-quarter results on May 4.) Berkshire is slightly expensive relative to its five-year average of 1.4 times book value. The stock is ahead of the market this year and over the past five years.
Book value is an old-fashioned valuation measure but is still relevant for Berkshire because of its large insurance operations — insurers still get valued on book — and because it has been a historical yardstick for the company since Buffett took over.
Buffett chooses to focus on intrinsic value but doesn't disclose his estimate of that figure. Buffett has said that book value is a greatly understated proxy for intrinsic value, although share repurchases at current prices do reduce book value, somewhat undercutting the use of that measurement.
Post Buffett, Berkshire's stock is likely to be supported by steady growth in its earnings and shareholder equity over time. The company appears capable of high-single-digit annual growth in book value based on $40 billion of operating income after taxes and gains in the $360 billion equity portfolio. If the stock keeps pace with the growth in book value, it could show similar share price growth.
A dividend is a good bet within a few years of Buffett's death. Why? It will help his successor disburse some of the annual operating earnings. Another reason is that investors won't be so tolerant of Berkshire holding so much cash — a record $168 billion at year-end 2023 — without Buffett at the helm.
Christopher Bloomstran, chief investment strategist at Semper Augustus Investment Group, wrote earlier this year that Berkshire stock could generate a 10% to 11% annualized return over the next 10 years, with annual share buybacks in the 2% to 3% range — above the recent rate of 1% to 1.5%. He pegged intrinsic value at around $720,000 a share.
UBS analyst Brian Meredith is one of the few Berkshire bulls among Wall Street analysts. He recently lifted his price target to about $722,000 per Class A share from $715,000. He sees improvement at both Geico and Burlington Northern. Berkshire is one of the most defensive big stocks in the market, given its balance sheet and earnings power. A market selloff could offer opportunities for Buffett.
Buffett is firmly against a breakup. He argues the conglomerate structure has numerous attributes, including tax benefits from the ability to quickly make use of any big catastrophe losses at Berkshire's insurance companies. Buffett has expressed confidence in the company's future, writing last year that "Berkshire has been built to last." And the company's Buffett-friendly 14-member board — including two of Buffett's kids — is well aware of his views.
"Berkshire has been run with enormous transparency, integrity, a long-term orientation, and a culture of stewardship. It is run by the greatest investor in history. That's the present," Chris Davis, an investment manager and Berkshire board member, told Barron's last year . "As for the future, every activist and investment banker will argue that in a world without Warren and Charlie, Berkshire's unorthodox structure shouldn't persist. I think it's worth defending."
Whatever the questions, Berkshire shareholders will savor the annual meeting, knowing there may not be many more with Buffett at the helm. As for the stock, many may heed the advice of Munger, who said that "they should keep the faith" rather than sell after he and Buffett are gone.
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3 months ago
>>> Billionaire Warren Buffett Recently Cut This Stock From Berkshire Hathaway's Portfolio. It Just Dropped 53% In 1 Day. Here's What Investors Need to Know.
by Courtney Carlsen
Motley Fool
Apr 17, 2024
https://finance.yahoo.com/news/billionaire-warren-buffett-recently-cut-101500983.html
Globe Life (NYSE: GL) stock plummeted by more than 53% in a single day last week after short-seller Fuzzy Panda Research accused the life insurance company of fraud. The claims piled onto the already struggling stock, which had previously been a longtime holding of Warren Buffett's conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B).
If you're thinking about buying the dip in the stock, there are some things you'll want to know.
Globe Life's troubles began last year
Globe Life was one of Berkshire Hathaway's longest-held investments, having been part of the conglomerate's portfolio for more than two decades. Berkshire held Globe Life through several difficult economic periods, including the COVID-19 pandemic, which put tremendous pressure on life insurers by elevating claims costs.
Buffett examines a management team's character and trustworthiness when investing. Buffett and his team have an excellent track record of evaluating management, which is a big reason for the conglomerate's long-term success. When Globe Life became the subject of several lawsuits accusing it of misconduct, Berkshire pulled the plug on its investment.
Last year, two Globe Life subsidiaries, American Income Life Insurance Co. and Arias Agencies, faced a lawsuit accusing them of inappropriate workplace conduct; this included rampant drug use, sexual abuse, and degradation of agents who didn't hit sales targets.
Globe Life's struggles continued when a former executive claimed he was fired for blowing the whistle on "potentially illegal" sales practices at the subsidiary. It appears that the accusations were why Berkshire sold its stake in the insurer last year.
Here's what short seller Fuzzy Panda had to say about the insurer
Fast-forward to this year, and Globe Life's troubles have gone from bad to worse. On March 6, the U.S. Department of Justice issued subpoenas to Globe Life and American Income Life. The subpoena is part of an investigation into allegations of fraud and misconduct at the (renamed) Arias Organization, now one of American Income Life's agencies.
Last week, the dam broke after short-seller Fuzzy Panda Research accused Globe Life of "extensive" insurance fraud that was ignored by management. According to Breakout Point and reported by Bloomberg, Fuzzy Panda Research was the best-performing active short-seller in 2023. Although short-sellers -- investors who try to profit from falling share prices -- suffered deep losses during the long bull market of the 2010s, they can help expose harmful or downright fraudulent business practices.
Fuzzy Panda reviewed hundreds of court documents and interviewed former executives and agents "who showed us where the fraud was hidden." According to the short-seller, the fraud was ignored by management despite being "obvious and reported hundreds of times." After the short report was released, Globe Life's stock plummeted 53% in a single day.
Following the serious accusations from Fuzzy Panda, Globe Life responded by saying:
We reviewed the report and found it to be wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements ... The short seller analysis by Fuzzy Panda Research mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false, misleading and defamatory.
Buy the dip?
According to The Fly, analysts believe the stock sell-off is overdone, but big question marks remain. Investment bank and investment firm Piper Sandler said that Globe Life's response "serves to assuage concerns but does not completely remove the vacuum that remains absent a broader communication about this matter with the investment community."
Another investment firm, Evercore, meanwhile, sees limited downside from here but says there is still "significant uncertainty for the shares."
Globe Life faces serious allegations, and the stock price reflects this. After its significant sell-off, aggressive investors may find the stock ripe for the picking. If you're willing to tolerate this risk, though, don't bet more than you're willing to lose.
However, given the uncertainty around the situation and the Department of Justice's investigation, most investors are better off waiting to see how things shake out; they should avoid the stock for now.
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gfp927z
3 months ago
>>> Apple’s first quarter has felt more like an entire (bad) year
Yahoo Finance
Daniel Howley
Mar 27, 2024
https://finance.yahoo.com/news/apples-first-quarter-has-felt-more-like-an-entire-bad-year-201715880.html?.tsrc=fin-notif
Apple (AAPL) is in the midst of what you could generously call a “difficult” period. The company is contending with a high-profile antitrust battle with the Department of Justice, falling iPhone sales in China, and a regulatory investigation in the European Union. And those are just the headlines from the past week.
The company is also still facing a shortfall when it comes to generative AI capabilities. And while it’s widely expected to debut some kind of generative AI offering during its WWDC developer event on June 10, it’ll need to have quite an impressive showing if it’s going to catch up to its Big Tech rivals including Microsoft (MSFT) and Google (GOOG, GOOGL).
All of that is hurting Apple’s stock price. Shares of the iPhone maker have fallen more than 7% since the start of the year and are up just 6.25% over the last 12 months. Shares of Microsoft, meanwhile, are up 14% year to date and 49% over the last 12 months. Google? Shares of the search giant are up 9% year to date and 43% in the last 12 months.
Suffice it to say, Apple’s 2024 is not going well.
Apple’s China problem
Apple’s latest headache came Tuesday, when Bloomberg, citing Chinese government data, reported that iPhone shipments fell 33% year over year in the country in February.
China is Apple’s third-largest market behind North America and Europe. In 2023, the region accounted for $72.6 billion of Apple’s $383.3 billion in total revenue. That’s roughly 19% of the company’s sales.
And this isn’t exactly out of the blue. Earlier this month, Counterpoint Research reported that iPhone sales fell 24% year over year through the first six weeks of 2024 in the country. Overall smartphone unit sales in China declined 7% during the same period.
Apple has been aggressively expanding in China for years, but a resurgent Huawei and difficult economic conditions in the country are squeezing device sales. The company isn’t just sitting idly by, though. Last week, CEO Tim Cook flew to China for the opening of the company’s latest flagship store in Shanghai. He also attended the China Development Forum in Beijing and was expected to meet with Chinese President Xi Jinping.
According to the South China Morning Post, Apple-authorized retailers are also trying to goose sales, cutting the price of the company’s latest iPhones in the hopes that it will get consumers to start buying again. However, it might take more than lower prices to make that happen.
A battle with the DOJ
Outside of Apple’s China sales drama, the company is also facing its long-anticipated antitrust fight with the Department of Justice. The lawsuit, which the DOJ filed last Thursday, accuses Apple of illegally maintaining dominance over the premium smartphone market by pushing aside competing apps and devices.
The Justice Department claims that Apple imposes restrictions on app developers, makes it difficult for users to switch to competing platforms, and hinders cloud gaming and so-called super apps that allow users to access multiple smaller apps from one larger platform.
Apple, however, is fighting back, saying in a statement that the suit "threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple."
The DOJ is seeking to force Apple to change its business practices, which could mean giving third-party apps greater access to the company’s platforms and requiring Apple to expand compatibility with third-party device makers.
The lawsuit could also prove to be a dangerous distraction for Apple similar to how Microsoft’s antitrust battle in the 90’s stole executives’ attention away from emerging technologies like smartphones. If Microsoft hadn’t been so invested in its antitrust fight at the time, there’s a good chance it would have seen the smartphone age coming as did Apple and Google, and launched its own line of handsets.
European Commission calling
In addition to slowing iPhone sales in China and the DOJ’s antitrust suit, the European Union’s competition watchdog, the European Commission on Monday, announced that it is looking into whether Apple is in compliance with the bloc’s Digital Markets Act.
In a statement released Monday, the Commission said it is investigating Apple’s new app fee structure in the EU as well as whether it meets user choice obligations related to default apps and the ability to delete preinstalled apps.
The Digital Markets Act requires Apple to open up the iPhone to third-party app stores, enabling developers to get around the 30% and 15% fees the company charges for sales through its own App Store. While Apple said it will allow those third-party stores, the company said it will also charge developers a 50 euro cent Core Technology Fee per install per year on apps that have been installed more than 1 million times in the last 12 months.
In a statement, the EC said it is looking into whether Apple’s new fees defeat the purpose of the obligations of the Digital Markets Act.
While Apple is certainly facing a slew of challenges, it’s far from down and out. It’s still the second-richest company in the world by market capitalization — behind Microsoft — and it’s sure to continue to sell millions of devices and services subscriptions throughout the year ahead.
Still, for the foreseeable future, Apple could be in for a bumpy ride.
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