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.

George Soros, Golden Boy; Home Run for Home Depot; Pandora’s Streaming Away From Profits

Just because George Soros is doing it…

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George Soros just put a whole lotta money in gold. Lucky for him. However, the non-George Soroses of the world are supposed to take note, because, after all, he is, “The Man Who Broke the Bank of England.” And also because, since his net worth according to Forbes is $25 billion, he knows a things or two. Or a billion. In any case, according to a very recent regulatory filing that folks like him have to file (it’s called a 13F, and you are welcome that I am sparing you the boring details), Mr. Soros has sold off about 37% of his stock holdings. He then whipped out $387 million to buy lots of gold, including picking up a hefty 19 million shares in Barrick Gold, the world’s largest gold producer. It seems Mr. Soros is a more than a bit freaked out by the state of the global economy, and especially the slowdown in China. He feels the fiscal climate is reminiscent to him of 2007 – 2008 period just before the fiscal crash we are all still trying to forget. Not everyone agrees with Soros and his decision for his Soros Fund Management, but hey, he is the one who, back in 1992, bet against the British pound and made $1 billion off that bet – in a single day. I bet he’s real popular there. Anyway, it’s no secret that gold has always been a strong performer on Wall Street, as well as other places, mind you. The precious metal is up 21% for the year. But, just so ya’ know,  Soros still has plenty of other cash in plenty of other places. Like eBay and Apple. And Yahoo. And Gap…well, you see where I’m going with this. In fact, he’s got $80 million invested NOT in gold. In case you’re wondering what stocks he did ditch, some of those include Alibaba Group and Pfizer. Also, TripAdvisor and Expedia are out of his portfolio. Though, he did keep airline United Continental Holdings. Go figure.

Home improvement…

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As the warm weather brutalized plenty of retail outfits lately, (sorry, Macy’s, Nordstrom), Mother Nature knocked it out of the park for Home Depot. In turn, Home Depot warmed our hearts by boosting its sales and profit forecasts after regaling us with the news of its better-than-expected earnings, courtesy of Mother Nature. And as we all know, Wall Street loves nothing better than better-than-expected earnings. Except when investors feel that shares have hit their potential, for the moment anyway, which explains why shares of the home improvement chain were a wee bit down today. But no worries. A good housing market and fabulous weather added some $250 million in sales for Home Depot in the quarter, with February being the sweetest month, fiscally speaking. For the year, Home Depot is up about 20%, posting a profit of $1.8 billion a $1.44 per share. That was a 14% boost over last year, not to mention that it trumped analysts predictions of $1.36 per share. The company also saw $22.76 billion in sales, again stomping on predictions of $22.39 billion. The earnings also showed that consumers are actually spending their hard-earned cash, as opposed to hoarding it under mattresses (okay, banks too), unlike what was previously thought because of the generally poor performance in the retail sector. Spending money is good for the economy and now economists aren’t so worried anymore because they realize where all that hard-earned cash went. For the full year the retailer thinks it’ll pull down $6.27 per share for the year. And Spring has hardly sprung!

Closing the box…

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Pandora Media has had better years. Even better decades. Founded in 2000, the company had its IPO in 2011 and has about 80 million active users. While it was amongst the first crop of music streamers, the company’s stock is now down about 40% for the last twelve months, having never caught the same momentum as some of its competitors, including Apple and Spotify. Enter activist investor/Carl Icahn protégé Keith Meister, who feels that the time has come for Pandora to put itself on the market. Keith Meister’s Corvex Management has some very strong feelings about how much better – and profitable – Pandora can be and seeing as how he’s got 22.7 million shares, giving him an almost 10% stake in the company, he’s entitled to more than just his opinion on the matter. As the largest shareholder in the company, Meister wrote in a recent letter how he has “become increasingly concerned that the company may be pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives.” Basically, he’s wondering if the folks in charge, namely CEO and co-founder Tim Westergren, knows what they’re doing. Wall Street certainly seemed to be agreeing with Meister, as it sent the stock up today as much as 7% at one point.

Divided They Fall at United; Puerto Rico’s Fiscal Plans Fall Short; Barnes & Noble is Singing the Fiscal Blues

Who me?

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Image courtesy of jesadaphorn/FreeDigitalPhotos.net

The airline United is anything but these days as honcho Jeff Smisek ducked out of the company he had been helming, along with two other executives. Apparently, it’s because of a Port Authority investigation that’s in full swing stemming from some events in 2011 that resulted in the “chairman’s flight.” The “chairman” refers to former Port Authority chairman David Samson, who managed to finagle United to offer twice weekly flights from Newark airport to Columbia, South Carolina. While I’m sure Columbia, South Caroline is a fabulous place, that particular flight route was initially deemed unprofitable. So what made the route become profitable all of a sudden? Coincidentally, David Samson’s weekend home is located there and that flight makes for an awfully convenient commute. See where I’m going with this? But the burning question is if those flights were a sort ahem bribe from the airline or a shakedown by Mr. Samson in exchange for some investment cash and other dispensations from the P.A. That all remains to be determined. David Samson already resigned in 2014 after a probe began over intentional lane closings on New York’s George Washington Bridge. Did I mention Samson was a close confidant of Chris Christie. Just saying. Days after stepping down, the Newark-Columbia route was shut down. I guess it wasn’t profitable anymore. As for Smisek, well he still walked away with $5 million and another $3.5 million in stock.

You debt-or believe it…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Puerto Rico thinks they finally have a plan to fix all that fiscally ails them. To address the territory’s $72 billion debt, a panel put out a five year plan to restructure $47 billion of it. With bondholders left to pick up the remainder, Puerto Rico will still be left with a $14 billion financing gap between 2016 – 2020. Lucky bondholders. Debt from the power, water and sewer companies is not included. The plan includes many reforms including a lot of cuts to education and teachers’ pensions. Why education is always the first to get spending cuts is weird since kids aren’t the ones responsible for creating debt. Know what I mean? Also, the plan calls for exploring public/private partnerships for hospitals, highway, building and transit authorities. The plan also wants to explore changes to the tax laws because, after all, why should the United States be the only place that needs to overhaul its tax code? As with any iffy fiscal plan, no timeline has been set which, in my most humble opinion, doesn’t bode well. Even then, the plan still needs approval from legislature and the governor.

What’s in store…

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Image courtesy of adamr/FreeDigitalPhotos.net

Barnes & Noble, though it may be the largest book store chain on the planet, still took a big old $35 million hit on $939 million in sales – worse than the year before when it saw a loss of $28.4 million Hey, the bigger they are the harder their sales fall. But who knows? Maybe with new CEO Ron Boire taking the reigns – as of yesterday – maybe there’s still hope for the embattled bookseller. These new earnings reflect B&N’s spin-off of its college-division, 600 stores and the Nook, B&N’s shaky attempt at putting its electronic stamp on the e-reader industry. The bookseller just can’t seem to make strides against Amazon. Well, to be fair, most companies find Amazon to pose quite the challenge. In any case, B&N lost 68 cents a share when last year at this time it only lost 56 cents a share.  $17 million of B&N’s loss was from the Nook and this was B&N’s fifth straight quarter of losses, sending shares down today over 16% at one point today.  But B&N has a plan, so they say for a new store prototype. Those stores will be considerably smaller and carry a larger assortment of merchandise, including toys and games, which incidentally saw a 17.5% increase for the chain.