Is This Stock As Good As Its Hype?
Saturday, May 5, 11:30 a.m. This is the weekend when Warren Buffett stages Berkshire Hathaway’s (BRK.A) annual meeting and the release of its 1st quarter earnings. As usual it has achieved its goal of a huge promotional effect personally for the “Sage of Omaha’, as well as for the company’s stock, with a big presence [...]

Saturday, May 5, 11:30 a.m.

This is the weekend when Warren Buffett stages Berkshire Hathaway’s (BRK.A) annual meeting and the release of its 1st quarter earnings. As usual it has achieved its goal of a huge promotional effect personally for the “Sage of Omaha’, as well as for the company’s stock, with a big presence in financial news articles and TV shows. A reported 40,000 investors are attending the annual festival known as the “Woodstock of Capitalism”, in Omaha.

For the first time, this year Buffett will be asked questions by analysts, apparently a panel of three selected analysts who are all positive on the stock, or so it’s being reported, those negative on the stock not represented. 

Berkshire’s 1st quarter operating earning’s were reported yesterday at $2.67 billion, or $1,615 a share. It was one of the few stocks for which Wall Street did not have its forecasts lowered enough. The earnings missed Wall Street’s estimates of $1,780 a share.

But no matter, the earnings were a lot better than the horrible 1st quarter a year ago.

So the headlines just make a guy want to rush out and get hold of some of this stock.

Yahoo Finance: “Berkshire Profits Double As Insurance Losses Fall.”

Wall Street Journal: “Berkshire Hathaway Profit Doubles.”

Financial Times: “Buffett Group Reports 67% Rise in Profits.”

MarketWatch: “Berkshire Earnings Boom.”

But as Bloomberg noted in an article on Thursday, Buffett’s Berkshire Hathaway’s performance has significantly underperformed the market over the last three years, gaining just 32% compared to 60% for the S&P 500. It’s up just 6.3% so far this year compared to 8.8% for the S&P 500.

Yet its price/earnings ratio is 19.2 times earnings compared to the S&P 500’s P/E ratio of 15.7.

The hype seems to work quite well.

And it’s not that it’s a great safe haven stock, or has a great long-term performance any more. Those days were back during the long secular bull market of 1982-2000, when Buffett’s buy and hold style worked so well.

Over the last decade plus it has pretty much matched the market, suffering big declines of as much as 53%. In fact it hasn’t even matched the market since 2008. The Dow, and Nasdaq have both ‘come back’ from the severe 2007-2009 bear market and gone on to at least fractional new highs.

Berkshire Hathaway has not even recovered all the way from last summer’s correction let alone its plunge in the bear market.

50512a

Maybe I won’t rush right out and buy it in spite of the headlines.

Interesting Charts.

The heavy week of economic reports, most of which continued to be downside surprises, finally had an effect on the market.

But the market’s worst week of the year (so far) only dropped the 30-stock Dow to the potential support at its short-term 21-day m.a. 

50512b

The broader indexes, which were already weaker than the Dow, were affected a bit more. 

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50512c

Just a short-term one-week blip, or the beginning of something worse intermediate-term?

Gold and the Gold Mining Stocks.

Gold bullion has provided a number of tradable moves in both directions over the last two years.

50512g

But has there been a more volatile or worse performing sector than the gold mining stocks over the last 16 months?

50512f

Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, there is an in-depth Mid-Week Markets Signals Update from Wednesday in the subscribers’ area of the Street Smart Report website.

To read my weekend newspaper column ‘Europe Is a Bigger Problem Than the Slowing U.S. Economy’ Click here.

Yesterday in the U.S. Market.

It was a negative day for sure. Volume picked up some to 0.82 billion shares traded on the NYSE. 

The Dow closed down 168 points, or 1.3%. The S&P 500 closed down 1.6%. The NYSE Composite closed down 1.5%. The Nasdaq closed down 2.2%. The Nasdaq 100 closed down 2.5%. The Russell 2000 closed down 1.8%. The DJ Transportation Avg. closed down 1.1%. The DJ Utilities Avg closed up 0.1%.

Gold closed up $8 an ounce at 1,642.

Oil plunged $4.01 a barrel to $98.53 a barrel.

The U.S. dollar etf UUP closed up 0.4%.

The U.S. Treasury bond etf TLT closed up 0.8%.

Yesterday in European Markets.

European markets plunged again yesterday. The London FTSE closed down 1.9%. The German DAX closed down 2.0%. And France’s CAC closed down 1.9%.

Global markets for the week.

A negative week, but mostly in the U.S. and Europe for a change.


THIS WEEK (May 4)
DJIA13038- 1.4%
S&P 5001369- 2.4%
NYSE7993- 2.0%
NASDAQ2956- 3.7%
NASD 1002737- 3.8%
Russ 2000791- 4.1%
DJTransprts5227- 0.8%
DJ Utilities468- 0.2%
XOI Oils1,193- 2.5%
Gold bull.1,643- 1.2%
GoldStcks156- 6.0%
Canada11871- 3.0%
London5655- 2.1%
Germany6561- 3.5%
France3161- 3.2%
Hong Kong21086+ 1.7%
Japan9380- 1.5%
Australia4459+ 0.6%
S. Korea1989+ 0.7%
India16831- 1.8%
Indonesia4216+ 1.3%
Brazil60820- 1.4%
Mexico39408+ 0.2%
China2452+ 2.3%
LAST WEEK (April 27)
DJIA13228+ 1.5%
S&P 5001403+ 1.8%
NYSE8152+ 1.6%
NASDAQ3069+ 2.3%
NASD 1002741+ 2.4%
Russ 2000825+ 2.6%
DJTransprts5267+ 0.6%
DJ Utilities469+ 1.9%
XOI Oils1,224+ 1.8%
Gold bull.1,663+ 1.3%
GoldStcks166+ 1.2%
Canada12239+ 0.8%
London5777+ 0.1%
Germany6801+ 0.8%
France3266+ 2.4%
Hong Kong20741- 1.3%
Japan9520- 0.4%
Australia4433- 0.3%
S. Korea1975unchgd
India17134- 1.4%
Indonesia4163- 0.4%
Brazil61691- 1.2%
Mexico39327- 0.1%
China2396- 0.4%
PREVIOUS WEEK (April 20)
DJIA13029+ 1.4%
S&P 5001378+ 0.6%
NYSE8025+ 1.2%
NASDAQ3000- 0.4%
NASD 1002676- 0.9%
Russ 2000804+ 1.0%
DJTransprts5234+ 0.7%
DJ Utilities460+ 1.8%
XOI Oils1,202unchgd
Gold bull.1,642- 0.9%
GoldStcks164- 1.8%
Canada12147+ 0.9%
London5772+ 2.1%
Germany6750+ 2.5%
France3188unchgd
Hong Kong21010+ 1.5%
Japan9561- 0.8%
Australia4444+ 0.9%
S. Korea1974- 1.7%
India17373+ 1.6%
Indonesia4181+ 0.5%
Brazil62494+ 0.9%
Mexico39354+ 2.4%
China2406+ 2.0%

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Next week’s Economic Reports:

Next week will be a very light week for potential market-moving economic reports, almost none. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

To read my weekend newspaper column ‘Europe Is a Bigger Problem Than the Slowing U.S. Economy’ Click here.

Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, there is an in-depth Mid-Week Markets Update from Wednesday in the subscribers’ area of the Street Smart Report website.

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m.

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