Apples to Apples: Warren Buffett Increases Stake in Tech Giant; Groupon’s Earnings Show Everyone Loves a Deal; Trump Wine Makes Trouble

Well, if Warren Buffett’s doing it…

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It’s all about Apple and airplanes these days for Warren Buffett. His company, Berkshire Hathaway, again increased its position in the iPhone maker to 57.4 million shares back in December. This means the company now boasts a hefty $7.74 billion stake in the Cupertino-based company. The Oracle of Omaha also decided to scoop up more shares in the airline industry’s four biggest carriers in the United States: American Airlines Group, Delta Airlines, Southwest Airlines and United Continental Holdings. This little purchase set Berkshire Hathaway back by about $9.3 billion. What’s a bit weird about Warren Buffett’s new-found affection for Apple, is that he has never been much of a fan of tech stocks only because – or so he would like us to think – that they are apparently outside his realm of understanding. I’m pretty sure there’s very little in this world that’s outside his scope of knowledge. Just saying. The airline investment was also a little surprising given Warren Buffett’s hands-off stance on the industry for the last twenty years. Now, however, he apparently sees some potential in airlines that he hadn’t seen in years. In any case, the timing of Berkshire Hathaway’s Apple purchase couldn’t have been better because shares of Apple closed at an all-time high yesterday, as I noted here in this blog.  In fact, shares of all the companies in which Berkshire Hathaway invested have gone up. Because if Warren Buffett puts his fiscal stamp of approval on a company, investors take that as a sign – albeit a not very scientific one –  and they all tend to follow suit.  As for his ten year old Walmart stake, the news was not as good. Berkshire Hathaway dumped almost all of its shares  – close to a billion dollars worth – and analysts are now wondering just how bad of an omen is that.

Get your Groupon, yo!

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Groupon, it seems, is not only beloved to bargain hunters, but to Wall Street as well, as the company just released its fourth quarter earnings, easily beating estimates all-around. For a company that’s all about posting discounts, it took in revenues of $935 million, when analysts only expected $913 million. While the company earned close to $370 million in profit, analysts were left a bit bummed, since last year’s number was higher, at almost $372 million. However, Groupon did add 7 cents per share, more than triple the expected 2 cents. Plenty of its success from the quarter is apparently due to its acquisition of website LivingSocial, which Groupon scooped up back in October.  Groupon’s customers increased by two million, one million of whom came from LivingSocial, and its total amount of customers purchased 11% more goods and services during the same period last year. Interestingly enough, the amount of purchases this past quarter was a smidgen lower, coming in at $1.70 billion, when last year at this time it was more like $1.71 billion. But hey, what do you expect from bargain-hunters, after all?

Cheers…

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In today’s installment of “Who’s Next to Face a Boycott for Carrying Trump Merchandise?”and the #GrabYourWallet campaign, we turn our attention to Wegmans Food Markets.  The offending merchandise in question is wine, or rather products from the Trump Winery, of which Eric Trump, President Trump’s son, is the President. While a group aptly named “Stop Trump Wine,” is calling upon Virginians to boycott businesses that carry the beverages because “Eric Trump shares the views of his father,” the local chapter of the National Organization for Women got 300 of its members to come up with ways to get Wegmans to put the kibosh on the products. But my question is, if the wine is really good, will the boycott be effective? Just wondering. Like all other retailers, Wegmans, with its 92 stores, explains that it only looks at how a product is performing. If the products in question are performing well, with people still buying them, and the boycotts aren’t necessarily having an effect, chances are, the wine stays put.

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French Company Goes Organic for U.S. Acquisition; U.S. Airlines Gear Up for Cuba; U.S. Banks Bond Over Brexit

Let them eat organic cake!

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Dannon Yogurt’s parent company, Danone (said with a French accent) is looking to pick up  a major U.S company that will effectively double its size. That’s assuming all goes according to plan. Danone wants to offer organic food provider, WhiteWave, purveyor of favorites like Silk Almond and Soy Milk, Horizon Milk and Earthbound Farms, $10.4 billion in cash for the fiscal pleasure of its company. That’s a 24% premium over WhiteWave’s thirty day average closing price and comes out to about to $56.25 per share. But for Danone, whose looking to make itself a bigger presence in the United States, it’s well worth it, since WhiteWave’s offerings tend to attract wealthier consumers. WhiteWave generates annual sales of about $4 billion and with this acquisition, Danone expects to see a $300 million boost in operating profit. Danone has also been struggling in other parts of the world and this acquisition would ease the burden of some of those lesser-performing markets. FYI, when companies offer to buy other companies, their offers tend be at least at a 30% premium. Because this offer was not, it theoretically means that the bidding door is still open to other offers from companies like Coca Cola, PepsiCo and Kellogg Co, to name but a few. In a regulatory filing, though, WhiteWave did graciously say that it wouldn’t solicit other offers. However, there are exceptions. Should WhiteWave go with another offer, Danone still wins because it will get a $310 million break-up fee.

Bienvenido…

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Believe it or not, Hillary Clinton wasn’t the only topic of conversation today coming out of Washington DC. President Obama announced a proposal to allow eight U.S. airlines to provide nonstop service between Cuba and ten U.S. cities, beginning this fall. This will mark the first time in 50 years that travel of this kind will be available. And all this just one year after diplomatic relations were re-established. The city and airline selections were made by the Department of Transportation and the lucky airline winners are: Alaska Airlines, American Airlines, Delta Airlines, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines. American Airlines is actually no stranger to the island nation, as it has been offering charter services there since 1991. Just last year the airline made over one thousand chartered flights to Cuba, while JetBlue made over 200 chartered trips. That’s awfully welcome news for an industry that took a fiscal beating lately. The cities that can look forward to the new service had to have have substantial Cuban-American populations already in place. Hence, Florida finds itself the recipient of 14 out of the 20 daily nonstop flights, since it boasts the largest Cuban-American population. The cities include: Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami,  Newark, New York City, Orlando and Tampa. According to Cuban officials, the number of American travelers to Cuba is up 84%, compared to last year, in just the first half of the year.  But there is still a trade embargo in place, which does include a travel ban. However, there are twelve convenient categories of reasons to fly to Cuba that you can check off should you decide to make your way to Havana any time soon.

Come together…

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It’s a fiscal kumbaya as four U.S. banks offered up their sincerest support for London following the Brexit vote. The gracious supporters include, JPMorgan, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley. The banks agreed to help British Finance Minister George Osborne find ways to ensure that the U.K. remains the prominent financial player that it always was, pre-Brexit. And of course they all will try and find new and exciting ways to lure and retain big banking to London so that the consequences of the Brexit don’t do the country in completely. While that sentiment no doubt warmed the hearts of investors all over the world, the investment banks could not offer up as much optimism as far as the jobs situation is concerned. After all, “no one in their right mind would currently invest in Britain.” Keeping those jobs there might might be the biggest challenge of all and no one wants to make any promises on that. Especially Jamie Dimon, who had previously mentioned that around 4,000 jobs could make their way out of London. In the meantime, the French wasted no time – I mean NONE! – in announcing to the world that it would make its tax regime as enticing as possible, in a not at all subtle attempt to grab some pricey banking business from London.

Global Markets Fight Back Terrorists; Lumber Liquidators Whacked with Another Settlement; Starbucks Feeds America’s Hungry

The terrorists have not won…

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Markets all over the world took a beating because of the cowardly terrorist attacks in Belgium that left dozens dead and many more wounded and forever haunted. Companies dealing in travel and hospitality industries suffered the most today with Royal Caribbean losing almost 4% and Carnival Cruise Lines taking its own 3% hit. Online booking site Priceline Group endured a 3% loss as airlines like Delta Airlines and American Airlines Group lost a couple of percentage points, as well. It’s no surprise, I suppose, that healthcare stocks actually saw increases, as did material stocks. But in a big f.u. to terrorism, the Dow Jones actually picked up a point as global markets rebounded later in the day, even those in Europe. Gold also rose, because well…gold always rise. Investors consider the precious metal as a perennially safe bet. Seems fair.

Tiiiiiiimmmmbbbberrrr…

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The settlements just keep coming in for Lumber Liquidators Holdings. Today’s award goes to the California Air Resources Board (CARB) – I laughed at the acronym too – in the amount of $2.5 million. The number seemed a bit low to me, especially since 40 of Lumber Liquidators 375 stores are in California, not to mention, the company’s flooring has the potential to cause cancer from the high levels of formaldehyde present in them.  Not exactly minor details, I feel. But the other reason I’m scratching my head is because there was no formal finding of any violation, nor was there any admission of wrongdoing by Lumber Liquidators. Just saying. This settlement, by the way, has nothing to do with Lumber Liquidator’s previous settlement with the DOJ that had the flooring company shelling out $10 million to the government agency. Naturally, shares of Lumber Liquidators are up by almost 16% and closed at $13.93. But considering that shares lost more than 70% of their value since that scathing “60 Minutes” report last March, and there are still plenty of class-action suits headed toward Lumber Liquidators, you probably don’t want to hold your breath waiting for the company to fully fiscally recover. In fact, if you ask Kase Capital’s Whitney Tilson,  who is a big fan of shorting Lumber Liquidators, he thinks the flooring company actually has a 50% chance of going bust.

Bon appétit…

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Don’t feel so bad skipping that sandwich you’ve been eyeing at Starbucks. If nobody buys it, you might just help feed someone who is considered “food insecure.” The plan came from baristas and now the coffee chain has made a pledge to donate 100% of its unsold food through FoodShare and Food Donation Connection (FDC). It’s all in an effort to feed the 48 million Americans who don’t have the luxury of knowing if or when their next meal is coming.  It is estimated that 15% of American households are considered “food insecure” while at the same time an estimated 70 billion of food waste is produced by Americans that are far more fortunate. Starbucks had already been donating pastries and other types of foods that had longer shelf lives since 2010. The challenge, however, was how best to preserve the highly perishable products like salads and sandwiches. But now the FDC will send refrigerated vans to all of Starbucks 7,600 plus U.S. locations, pick up all those unsold goodies and fill the bellies of those who could really use them. Starbucks plans to have given out 5 million meals by the end of 2016.

 

United We Pay, Dunkin Donuts Buzzkill and Shacking Down

Are you a frequent big spender?

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Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

United Airlines has big changes in store for its frequent flier program. Only “frequent” doesn’t accurately describe it.  A better term would be “The Flier Who Spends The Most Gets The Most” program. Like rival airline Delta announced earlier in the year, United Airlines’ reward travel is now based on dollars spent and NOT how frequently you actually fly. It was considered by many an expert a risky and brazen (translation: bad) move since United doesn’t particularly rank very highly with consumers. Which is being very generous considering the carrier came in last  in the J.D. Power and Associates 2014 North America Airline Satisfaction Study. MileagePlus President Thomas F. O’Toole said in a statement, “These changes are designed to more directly recognize the value of our members when they fly United.” Isn’t that sort of like saying that the changes are designed to not recognize the value of non-members who fly United? Just wondering.

Nothing to sip at…

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Image courtesy of phasinphoto/FreeDigitalPhotos.net

I suppose it had to happen. The price of Dunkin Donuts coffee, the kind you buy at the grocery store, is about to go up by 9%. Apparently a fungus, very unappetizingly called coffee rust and a Brazilian drought are toying with our collective caffeine fix and making for smaller coffee crops. And in case you were wondering, the answer is yes. The price of coffee at your local Dunkin Donuts will also increase though, by how much has yet to be determined. As if that weren’t heart-breaking enough, expect to pay more for donuts, muffins, sandwiches…well, everything. But on the bright side, the Dunkin Donuts powers-that-be still want to sure that its coffee is still cheaper than Starbucks. Like that’s hard to do.

Radio smacked…

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Image courtesy of sippakorn/FreeDigitalPhotos.net

Ah. It pains me to write this but Radio Shack, where I purchased many a Walkman and batteries in years past, has posted its ninth straight quarter of losses. With a $98.3 million dollar sales decrease on its books, the chain continues its struggle against the mighty Wal-Mart, Best Buy and even mobile companies. Last year at this time Radio Shack posted a loss of just $28 million. It plans to close 200 stores over the next three years. The company was dealt a major blow with same store sales falling by 14%. Sure, Wall Street figured the company would lose some revenue, about $767.5 million, but alas, the Shack did $30 million dollars worse than that. And over the past year, shares of the company dropped over 60%. But of course, like any other shrewd CEO who posts horrible earnings and then tries to deflect the issue, CEO Joseph Magnacca sees this as a temporary hiccup and wants to reassure the world that Radio Shack shall persevere with up coming new private brand products and other stuff.

GM’s Future Is Looking Green, Big Mac Selfie Time and the Airline Industry Is Full of Surprises

Unstoppable…

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

File this one under things that make you hmmm…Following a horrific year and quarter, GM and its CEO Mary Barra  came out…on top! Even after a massive recall fiasco that put a gaping $1.3 billion hole in General Motors financials, the automaker was still seeing green today. Profits for the company were down 85% yet it still beat the Street’s expectations by $0.02. Yes two cents, as in General Motors does in fact have two cents to rub together…and more. GM’s earnings were up by $0.06 cents a share when Wall Street only expected it to rise by $0.04. General Motors CEO Mary Barra, who has only been at the helm since January and took a brutal Congressional beating over GM’s disastrous recall debacle that cost several lives, was also just named one of Time Magazine’s 100 most influential people.

Not just clowning around…

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Image courtesy of Naypong/FreeDigitalPhotos.net

“Selfies…here I come.” No that wasn’t Miley Cyrus! But guess who is finally joining the Twitterverse? None other than everyone’s favorite big-mac shilling red-headed clown, Ronald McDonald. The official face of the Golden Arches is also getting a stylish (I’m being generous here) new makeover – replete with cargo pants, a striped rugby shirt and banging new red blazer. If that doesn’t scream Abercrombie & Fitch model, I don’t know what does. The clown’s last makeover was nine years ago and many suspect this new look has a bit to do with Taco Bell and its new campaign to corner the fast-food breakfast arena. Incidentally (or not), Ronald McDonald’s new look was unveiled a day after McDonald’s announced lower than expected sales and profits. You can find Ronald McDonald invading social media at the #RonaldMcDonald hashtag and @McDonaldsCorp.

Wingin’ it…

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Photo courtesy of bplanet/FreeDigitalPhotos.net

American Airlines scored huge when they announced their first quarter earnings beating the Street by almost $0.20 a share. Wall Street predicted they’d come in with earnings of $0.46 a share but (audible gasp) they came in at $0.65 a share! And if you’ve flown with American Airlines recently then you know that is nothing short of miraculous. They posted first quarter revenue of $10 billion and net income of $480 million. Last time I flew American (August), they still hadn’t updated their aircraft fleet and if you wanted to watch television you had to do so on their antiquated drop down televisions with lousy picture quality. A Snickers bar on the flight cost almost as much as the flight itself. So I suppose the numbers  do add up. Delta also pleasantly surprised Wall Street with a nice first quarter profit even though it had to cancel a whopping 17,000 flights due to severe weather. JetBlue and UnitedContinental, despite having newer fleets and presumably better…everything (than American Airlines) didn’t fare as well.