Tuesday, February 15th, 2021 – Volume 1 – Issue 156

The Biggest Changes to Warren Buffett’s Portfolio

Dow Jones: 34,988 (+1.22%)

S&P 500: 4,471 (+1.58%)

Nasdaq: 14,139 (+2.53%)

Russell 2000: 2,076 (+2.76%)

Bitcoin: $43,975 (+4.25%)

Ethereum: $3,100 (+7.01%)

 

Today was a great day for stocks… The markets rallied today after a rough 3-day red streak as investor fears over a war in Europe started to quell. The Russian Defense Ministry said they sent some troops away from Ukraine’s border.

Also boosting investor sentiment is the fact that US Covid cases are down 80% from their January peak. Airline and cruise stocks were some of the day’s biggest gainers.

Inflation: The producer price index report showed an increase of 1% for the month, beating estimates of a 0.5% increase… The 10-year Treasury yield jumped above 2.04%.

Crypto: Risk-on assets rallied as the geopolitical tensions eased slightly, leading to altcoins outperforming Bitcoin on the day. Top gainers of the day were Avalanche (AVAX +13%) and metaverse gaming coin Gala (GALA +22%).

Now for the top stories of the day…

Source: Heat Map & Sector Performance — Finviz.com

Virgin Galactic Just Flipped — Here’s Why its Up 32%

For a stock that promises a lot of space travel, Virgin Galactic (SPCE) has been pretty disappointing for many investors… The stock has gone on a wild ride over the past two years — but recently, things have been especially bad as the business has continued to announce a ton of delays.

Sir Richard Branson’s space tourism stock is down nearly 80% over the past year. And year-to-date, shares are down roughly 22%.

But luckily, it looks like things could start turning around… 

Virgin Galactic just announced its opening ticket sales to the public for the first time ever this week, and the legendary space tourism tickets command a pretty hefty price tag (which means lots of cash for the company if demand is high). 

  • Tickets start at $450,000 each, with packages available for single seats, couples trips, and even the option to book an entire flight
  • Virgin Galactic requires a $150,000 deposit for the tickets ($25k of which is non-refundable)

Today’s huge move: Shares of SPCE surged as much as 30% today as a result of the new ticket offerings. Investors feel like the cash raised could help get Virgin Galactic closer to its commercial spaceflight goals while ticket sales also boost investor confidence in the demand for space tourism in general.

The First Big Bank to Enter the Metaverse…

The largest bank in the United States now has a branch in the metaverse… 

Yep, you heard that right. JPMorgan Chase just opened the “Onyx” lounge in Decentraland, one of the most popular decentralized metaverse platforms in the Web 3 space. But what exactly will JPMorgan use the Onyx lounge for?

Well basically, it seems like JPM wants to be the go-to financier for the metaverse — and it plans to do so with the backing of its real-world brand and credibility in a space that’s historically been pretty sketchy to operate in. 

  • In Theory: “We believe the existing virtual gaming landscape (each virtual world with its own population, GDP, in-game currency and digital assets) has elements that parallel the existing global economy,” according to the bank’s report. 
  • In Practice: “This is where our long-standing core competencies in cross-border payments, foreign exchange, financial assets creation, trading and safekeeping, in addition to our at-scale consumer foothold, can play a major role in the metaverse.”

JPMorgan is also particularly bullish on the virtual real estate market — the bank says that over time, we may see services pop up for metaverse real estate that we see IRL, like credit, mortgages, and even rental agreements.

And as far as the Onyx lounge goes, that just seems like the first step to establishing a presence in the metaverse while the firm puts together its plan to execute on the long list of digital business opportunities.

(Almost) Endless Opportunity: JPMorgan sees a lot of potential in DeFi collateral management, metaverse entertainment, fashion, and advertising (which the bank sees hitting over $18 billion by 2027). But there are still tons of things that need to be improved on before things really take off in a huge way.

The bank highlighted three core areas of improvement that will make the metaverse economy that much better — overall user experience, avatar performance, and commercial infrastructure.

Michael Burry’s New $10 Million Bet on EVs

Dr. Burry is known for profiting hugely from the 2008 subprime mortgage crisis, betting massively against Elon Musk, and dropping knowledge bombs and cryptic messages on his Twitter account before deactivating it and disappearing into the ether indefinitely…

He does this all the time — which is pretty interesting to say the least — but despite his quirks (and past Tesla shorts), overall he seems like a pretty darn intelligent guy with a knack for generating strong returns.

And now he’s making another big bet in the EV space… but this time on the long side. 

  • Reports show that Burry’s Scion Capital Management added a $10 million stake in AEA-Bridges Impact Corp (IMPX) in Q4

AEA-Bridges Impact Corp is a SPAC that is set to merge with Harley Davidson’s electric motorcycle division called LiveWire. The first LiveWire was released as a Harley Davidson in 2019, but now, the company is spinning off as its own entity.

  • LiveWire is set to go public through the SPAC in Q2 of this year and trade under ticker symbol LVW

Why so bullish? While Burry hasn’t made any public comments about his position in LiveWire, a quick look at the EV motorbike market shows us that there isn’t really a dominant established brand (like Tesla is to electric cars). 

And interestingly enough, when asked about a potential electric motorcycle, Musk said Tesla had no intention of designing or producing one because he personally finds them extremely dangerous… So Burry may see LiveWire as a well-positioned player who could quickly rise to the top of the market once it goes public.

Burry’s Other Moves

  • The famed investor also added a significant position in Bristol-Myers (BMY) in Q4, which is now his largest long position
  • Burry also built new positions in Fidelity National (FNF) and General Dynamics (GD)

China’s Digital Currency is Already Processing Billions per Day

As of now, nearly 90 countries around the world are experimenting with some sort of central bank digital currency, or CBDC. And those 90 countries represent about 90% of the global GDP… so if you still didn’t think blockchain was a pretty big deal, well think again!

Leading the way in terms of testing out its CBDC on a massive scale is China, who’s digital yuan is being used to process billions of dollars worth of transactions as we speak. 

  • According to a top official from the Chinese government, the digital yuan is being used to make nearly 2 billion yuan ($300 million) worth of payments every single day at the Beijing Winter Olympics.

Now, analyst Joe Mazur says that the digital currency is “still a long way from widespread domestic rollout, let alone international adoption.” But what’s the big deal about CBDCs anyway?

Of course, paying for things through a digital wallet is nothing new. We’ve all used PayPal, Venmo, CashApp, or Apple Pay at some point… But doing so with legal tender with near-immediate settlement times surely is a novel concept. 

  • With the future of money being digital, governments want to give their citizens access to easy banking, stable money, and fast transactions in order to keep their currencies relevant in a rapidly changing global financial landscape.

But there’s a dark side to this as well… as a blockchain native technology, all data is stored on-chain. And unlike bitcoin, CBDCs are very much centralized. So they leave room for a lot of unanswered questions about privacy, security, and government surveillance of finances.

The Biggest Changes to Warren Buffett’s Portfolio

Buffett, Munger, and the Berkshire Hathaway team may keep their approach to investing simple, sweet, and to the point… but that doesn’t mean the Oracle of Omaha doesn’t change things up every once in a while in a big way.

In fact, last quarter, Buffett made some significant changes to the Berkshire Hathaway portfolio — with one of the most notable moves being the near-30% increase in exposure to Chevron and energy (CVX).

  • Buffett first bought Chevron in 2020 before oil and energy stock prices surged throughout 2021.
  • At the end of 2021 in Q4, Berkshire owned 38 million shares of Chevron stock — 33% more than the previous quarter.
  • CVX is now the 9th largest holding in the Berkshire portfolio (worth over $4.5 billion).

As for the rest of Buffett’s top 10 stocks, not much else really changed in Q4. Apple was still Berkshire’s top holding (by a long shot… worth $158 billion) and 70% of the total portfolio was in just 4 stocks: Apple, Bank of America, American Express, and Coca-Cola.

But the king of value investing still made some big changes to some of his smaller holdings:

  • Buy ATVI: Berkshire bought 14.7 million shares of Activision Blizzard before the company announced the acquisition bid from Microsoft for $69 billion.
  • Sell V and MA: Berkshire trimmed down its Visa and Mastercard positions by 13% and 7%, respectively.
  • The rare IPO trade… Berkshire invested in Nu Holdings, the parent company of Brazilian digital bank Nubank, in the Omaha-based investment conglomerate’s first IPO trade since Ford in the 1950s.

Buffett’s stellar outperformance: Let’s face it, the Oracle of Omaha is killing it this year as speculative stocks and small caps have been getting completely destroyed by the broader market. Berkshire Hathaway (BRK) is up 4.33% year-to-date! Track Warren Buffett’s portfolio here

Bulls

Tower Semiconductor (TSEM) +42.08% – Intel agrees to purchase Tower Semiconductor for $5.4 billion. 

Virgin Galactic (SPCE) +32.10% – Virgin Galactic shares surged today as spaceflight ticket sales were announced with a $150,000 deposit 

Marathon Digital (MARA) +12.05% – Crypto rallied alongside stocks today as Russian fears settle with troops being pulled back. 

Bears

Avis (CAR) -12.05% – shares dropped significantly today after beating heavily on earnings. 

Global Payments (GPN) -2.05% – Global Payments delivered decent Q4 earnings results with revenue coming in 1% above expectation. 

Barrick Gold (GOLD) -1.94% – Gold prices dropped today as Russian fears eased and many speculate if we’ve reached the top of inflation growth. 

 

Target (TGT) – Evercore ISI opened a tactical underperform on Target saying the firm is concerned about margin growth. “Our concern is that the CY22 EBIT margin guide is likely to be in the 7-8% range, implying downside to the Street’s 7.9% outlook. Target has done a great job of driving traffic growth and the two-year comp sales stack is in the mid-30% range.”

United Airlines (UAL)Wolfe downgraded shares of United Airlines from peer perform to underperform saying the company is burning too much cash. “Lastly, we’re downgrading UAL from Peer Perform to Underperform given our expectations for massive cash burn the next few years.”

Macy’s (M) – Cowen named Macy’s a top stock pick into earnings saying the stock’s valuation is extremely attractive. “Our top pick is M given greater upside potential on category strength, merch margins, and digital innovation.”

Quote of the Day: “You can be grinding for 4 years with no results, and in the 5th year, become the biggest thing on the planet. The power of not giving up is real.” – Jeff Bezos

Fun Fact: Everyone uses Apple Computers, right? Nope. As big of a brand that Apple is, Windows PC’s own a whopping 90% of the entire market share.

  • Scientists have possibly cured HIV in a woman for the first time
  • High lumber prices are adding nearly $19,000 to the cost of a new home
  • Super Bowl viewership came in at 112 million, up 14% from last year
  • MoneyGram stock soars nearly 20% after announcing it would be taken private for $1.8 billion
Grow your business, Advertise with us or Learn more

Copyright © 2021 | Hungry Bull | All rights reserved