What We're Reading ~ 10/23/19

Blackstone CEO's new book: What It Takes [Stephen Schwarzman]

Taking a look at Domino's [Timberwolf Equity Research]

Quick new interview with Peter Lynch [Fidelity]

Denise Chisholm on historical sector valuations [Barrons]

With DataXu buy, Roku unveils big ad ambitions [Digiday]

At Costco, everything resonates with the consumer [Retail Dive]

Disney, IP, and returns to marginal affinity [Matthew Ball]

Apple Pay and the future of mobile payments [PYMNTS]

Technical overview of Elastic (ESTC) [Motley Fool]

Inside Apple's long, bumpy road to Hollywood [Hollywood Reporter]

20 countries that will face population declines [Business Insider]

Warren Buffett Interview: Summary, Video & Transcript

Yesterday on CNBC Warren Buffett sat down for a 2-hour interview with Becky Quick and shared his thoughts on a number of financial topics.  Here's a summary and select quotes, with videos and transcript below.


Warren Buffett Interview Summary

- On the economic signals he sees from all his businesses:  "The rate of improvement has tapered but certainly hasn't flattened ... Home construction has been disappointing, but our retail figures in January were not strong, but January is a peculiar month.  Right now things look fine."  He also noted he sees some signs of inflation in raw material costs.

- On the Federal Reserve & interest rates: "I don't second guess (Jay Powell) at all.  He's a terrific choice."  He said what the Fed does doesn't affect what Berkshire does.

- He's amazed that ten years after the crisis that rates are where they are worldwide (especially negative rates) with the world doing 'really well' now.  "The real question for investors: are these rates the new normal?"

-  On Apple (AAPL): "The lower it goes, the better I like it obviously ...  If it were cheaper, we'd be buying it.  We aren't buying it here"  This quote is interesting considering that AAPL was recently down as much as 30+% in the fourth quarter, but Berkshire was a net seller of shares as one of the portfolio managers (not Buffett) was selling.  His average cost basis is around $141 per share.

- Likes financials as "very good investments at sensible prices.  They're cheaper than other businesses that are also good businesses by some margin."  Says Moynihan at Bank of America (BAC) was underestimated and has done excellent.  Says JPMorgan Chase (JPM) is a very well managed bank.

-  Wanted to be buying stocks in Q4 as they were cheaper, but it sounds like Berkshire was keeping cash on hand for a potential acquisition that didn't materialize.  He said they haven't been buying equities yet in 2019 as the market as 'basically gone straight up.'

- Notes that portfolio managers Ted Weschler and Todd Combs since joining Berkshire: "Overall, they are a tiny bit behind the S&P, each, by almost the same margin."  The now manage around $13 billion each.  Buffett says they've also done better than he has over that time period.

-  On the trade war: The tariffs have had some impact on some of his businesses.  "It pushes prices up, there's no question about that."  It hasn't had a big impact at 10% but 25% you'll have to make changes (pricing, sourcing, etc).

- On KraftHeinz (KHC): Brands in general aren't what they used to be, and in many cases consumer packaged goods companies are being threatened by a ton of new brands, increasingly strong private label, and more.  "The ability to price has been changed, and that's huge."  On his investments he noted: "We didn't overpay for Heinz ... but we overpaid for Kraft."  Says the co still has real debt to be reduced.

- Sold Oracle (ORCL) quickly after concluding he didn't understand the business well enough.  His past dalliance with IBM also entered his mind.  "I don't think I understand exactly where the cloud is going."

- "You do not want to have a political view in investing."

- If Bloomberg announced he were running for President, he would be for him.  If Howard Schulz runs as an independent, he thinks he'd take votes away from Democrats, so it'd be a mistake for him to run.  Generally, third party candidates are going to hurt one side.


Warren Buffett Interview Video

Embedded below is the video of the full interview




Warren Buffett Interview Full Transcript

You can also read a full transcript here.

For more from Berkshire, be sure to also read Warren Buffett's annual letter 2018.

Greenlight Capital Q3 Letter: Sold Apple, Still Short Tesla

David Einhorn's hedge fund Greenlight Capital has had a rough 2018.  They're now down 25.7% for the year.  During the quarter, they exited the last of their longstanding Apple (AAPL) position at $228 per share. 

They feel their AAPL thesis that was once differentiated has now become consensus and the valuation of 17x forward earnings is "much less enticing and we are somewhat worried about Chinese retaliation against America's trade policies."

Greenlight also continues to be bearish on Tesla and noted many similarities to Lehman Brothers before its collapse.  They also highlighted CEO Elon Musk's erratic behavior.  There's numerous paragraphs about TSLA in the letter below.


Greenlight New Longs: Altice USA and BT Group

In other notable portfolio activity, they initiated two new longs: Altice USA (ATUS) and BT Group. 

ATUS they acquired at $18.38 and view it as a discounted play on cable peers in the US.  They feel the company has better cashflow conversion and more investment opportunities than rivals. 

BT Group they purchased at £2.19 and feel that shares were cheap at 4.7x EV/EBITDA and an 8% dividend yield. 

They also covered their 11 year short in Martin Marietta Materials (MLM) and covered another short: TransDigm Group (TDG). 

Also, they sold out of their Micron (MU) position and exited their Mylan (MYL) stake as well.


Greenlight Capital's Q3 Letter

Embedded below is Greenlight Capital's Q3 Letter:



For more recent hedge fund commentary, check out Bill Ackman's new long Starbucks SBUX presentaiton.

Warren Buffett Interview: Bought More Apple, Berkshire Buys Back Stock

Warren Buffett of Berkshire Hathaway was just interviewed by Becky Quick on CNBC.  Here's a summary of his thoughts:

He notes he bought a little more Apple (AAPL) recently.  He doesn't care about one quarter or one year's worth of iPhones sold.  He'd obviously like to see each product cycle do well, but he notes he's mainly viewing the company as an indispensible utility.  He argues that the value you get on a daily basis for only $1000 (price of an iPhone) it's a no-brainer.  People are so attached to their devices and use them for so many different things.  He doesn't own an iPhone but has an iPad and uses it frequently.  Would love to see the stock pullback as he could buy more or the company could buyback more stock at cheaper levels.

Berkshire hasn't been buying more airline stocks mainly because he doesn't want to go over the 10% ownership threshold in them, and he has to trim them if the companies are buying back stock.

Buffett said that consumer packaged goods are a good business from a return on tangible assets perspective.  While he acknowledged the businesses have seen increased competition and changing consumer tastes, they're still a good place to be.  He likes brands but is aware it's a tougher environment than it used to be, especially with the stocks much higher these days.  When asked about Campbells (CPB), he said Berkshire wouldn't be interested but he couldn't really speak for Kraft Heinz (KHC).  He said it's very hard to offer a premium for a packaged goods company.

Berkshire bought a little bit of its stock recently, Buffett notes.  They removed the previous restriction of a multiple of book value.  They're now looking at it from an intrinsic business value perspective.

"The economy since the fall of 2009 has gotten progressively better, but it started from a very low base.  We've had 9 full years of improvement in business. Business is good, across the board."

Noted that stocks are better than bonds and real estate.

He's seeing inflation in input costs on raw materials.  It's hard to say if that's due to the tariff situation or other factors, but he noted it increased certainly over the last year and particularly after the trade war situation.  He specifically noted steel, building materials, as well as paint cans as areas where they're seeing increased costs.

On Fed chairman Jay Powell, Buffett likes him and thinks he's doing a good job and will do what's best for the economy.

Warren Buffett, Charlie Munger & Bill Gates Interview

Today on CNBC, Berkshire Hathaway's Warren Buffett was interviewed by Becky Quick and talked about a range of topics.  Charlie Munger and Bill Gates later joined the conversation.  Here's some takeaways and quotes:


Warren Buffett's Thoughts

On the market: Stocks aren't in a bubble now.  Though said some private deal valuations are getting high and it's harder to find bargains these days.

On the economy:  Thinks the economy has picked up steam. "Yeah, I see a lot of numbers (from all BRK's businesses).  Business is generally pretty strong."  He cited railcar loadings, etc.  Also notes you've seen some inflation.

Says he thinks it's hard for unemployment to really go much lower as they have a ton of jobs available.  "If a resource is scarce, prices go up."  Says certain job lines are much harder to fill these days (construction cited specifically).

On potential trade wars:   "I don't think we will have trade wars of significance."  He thinks there will be trade movements though.  Says a trade war with China would be negative for all involved as they have a common interest.

On Amazon / Jeff Bezos:  Still laments not buying it in the past, says what Bezos has done is incredible.

On moats: Cited iPhones, Costco, and Elmer's glue as examples

On Apple: Says he doesn't have to do anything because the company will buyback so many shares, so his ownership stake will go up naturally.  He recently bought a ton more AAPL shares.  Said he currently owns around 5% of the company but he'd like to own 100% of it.  The consumer behavior was the main driver behind his ownership, as the device has woven itself into consumer's daily lives and minds, and it's a very useful product.

On owning banks:  Has owned one in the past and loves the banking business but doesn't want to now because of the bank holding co act.  Says Wells Fargo (WFC) was slow to act in addressing bad actions but still has a fundamentally solid business.

On bitcoin:  Compared it to the tulip bubble years ago.  Says it's a non-productive asset and just sits there.

On autonomous vehicles: 'Net it will be bad for the car insurance industry if autonomous vehicles become the norm.'  It will be very hard to pick winners in 5 years.

On reading he recommends, Buffett again pointed to Chapter 8 of The Intelligent Investor.  But this time around he also recommended Chapter 4 of Steven Pinker's new book, Enlightenment Now.

Ends his interview by reiterating: "It's very important in life to associate yourself with people that are better than you."


Charlie Munger's Thoughts

On the biggest thing he and Buffett have disagreed on:  Munger wanted to buy the French stake in Costco.  Buffett didn't and says he should have.  "Charlie really wants to wait for the fat pitch."

Munger said, "There's a million ways to be irrational." And while Berkshire makes mistakes, they make them far less frequently than others and he thinks that's their main advantage.

Munger noted: "The Munger family is invested in China substantially.  Since about 14 years ago, and I did it because I respected the man that was going to do the investing (Li Lu) and it looked undervalued and the companies looked very strong."  Today, he says the best companies in China are still cheaper than the best companies in the US.  "I don't think it'd be all that hard for people to find 4 or 5 companies in China to invest in."

He also said he wished Berkshire owned more of Apple.  He likes that it's reasonably priced and strong, a 'very desireable combination' as well as 'very intelligent management.'

On bitcoin, Munger called it worthless artificial gold.  "It's a scumball activity."

On potential trade wars with China: "It would be insane for them not to work together."

On what he's been reading recently:  A book by a Chinese economist, though he didn't mention the name specifically.


Bill Gates' Thoughts

He said that "T-bills set the rules" and he pointed out that since the 10-year yields 3%, you've got that hurdle to get over by taking more risk.  He says asset class returns will be lower over the next 10 years.

On bitcoin: There's some really good technology as far as sharing databases etc, but the coin itself is a speculative thing.  He received some for his birthday a while back but sold it, so doesn't own it now.  Called it a greater fool investment, and said he'd short it if there was an easy way to do so.

Gates says there are tech stocks that are undervalued, but you're going to get very high variance as the winner in some markets gets a high share of the profit pool.

He owns a ton of Microsoft (MSFT) obviously, but revealed he has a 'fantasy stock portfolio' of companies he thinks will do well but doesn't own.  "The top tech companies have a very strong share of the profit pool right now."  He obviously declined to reveal names.

Gates also echoed Munger's China sentiment that it looked attractive.

On tech and data privacy, thinks regulation is inevitable.  But the big companies will handle that.

On Tesla (TSLA): thinks they have a great product but a very high valuation and a lot of competition coming.  Says autonomous and electric vehicles are coming simultaneously and thinks 15 years from now things will be very different.

On what he's been reading recently:  Hans Rosling's book Factfulness.  Says it helps you think about a lot of different things in the world.

Warren Buffett CNBC Interview: Summary & Transcript

CNBC's Becky Quick interviewed Berkshire Hathaway's Warren Buffett on a range of topics yesterday.  Below is a summary of noteworthy comments and a link to the full transcript.


On tax reform:  "It's a huge tailwind. And it's particularly a tailwind if you've got-- particularly for companies that have had lots of depreciation and taken bonus depreciation up front. So it's a big item-- there. Not as many companies have lots of appreciation and marketable securities, but it's a big item for those that do."


On market valuation:  "I mean, it--in fact, I-- the market-- the stock market relative to the long-term bond market-- people have free choices, pretty much, if they're going to be in marketable securities. They can own reasonably long-term bonds, they can own equities, or they can keep it in short-term cash equivalents. And--- if-you had to choose between buying long-term bonds or equities-- I would choose equities in a minute now ...

That doesn't mean I think the stock market is gonna go up or anything else. But if- I were going to own a 30-year government bond or own equity for 30 years, I think equities will considerably outperform that 30-year bond over the 30 years. I don't know what they're gonna do in any day or week or month ...

In-- so far this year we've been-- a net buyer, although we sold-- a chunk of Phillips to get below 10%"


On whether he would buy any parts of General Electric (GE):  "If we like the business and the price was right, we could write a check for cash. And that would apply to GE. They've got a few big businesses. I don't think they want to sell them, but they have some smaller units that they're interested in selling. But we're always in the market for a big business that we can understand and that we like, and we think that we've got the management for and so on."


On Buffett's favorite stock, besides Berkshire:  "Well, if you look at our holdings, you would assume that we like them in the order in which they rank by dollar value of holdings. But if you look at them in terms of recent purchases, you know, over the last year, we've bought more Apple than anything else ... I haven't told you what I might have been buying in the last week. Or month"


Shoutout to CNBC for asking the question we submitted on Twitter via the #AskWarren hashtag:  Has Buffett ever disagreed with any of Todd (Combs) or Ted's (Weschler) investments, and why?



"Yeah, well, they make their own decisions, 100% and they each manage $12 billion or $13 billion now. Well, they started actually, I think when Todd came about a year ahead of Ted. And I think maybe it was $2 billion, but it has increased at various points and then they've earned a lot of money for Berkshire, which builds up for them, too. There's certainly – they've done things I wouldn't have done. But I've done things they wouldn't do, too. I mean, I want them to figure out their own. The choices – they are good at managing money, and they've got the advantage of managing smaller sums than I'm running. But they've got the disadvantage of running quite a bit larger sums than most people run. I mean, it gets more difficult with size. But they not only have done a good job of managing the money and trusted them. But they've contributed to Berkshire in just dozens of ways. They were sensational hires."

Becky Quick then followed up and asked if he talks to Todd/Ted about investments beforehand:

"No, not ahead a time. And there's a number of them I haven't talked with them at all. I couldn't even – I couldn't name three quarters of their portfolio. I couldn't tell you the amounts. I don't remember that well. But I've gotten ideas from them. But they take on other tasks. I mean, Todd is on the health care situation. He's there on Saturday. I was there on Saturday. He's there all day talking to people around the country in terms of looking for the right CEO and that sort of thing. They are enormous contributors to Berkshire."


On owning Samsung in the past:  "I don't own them, and Berkshire doesn't own them now. But Berkshire has owned Samsung. It doesn't get reported in our 13F.  But I think I'm right on that. I'm 99% sure. And so we bought some when Samsung was at about a million yuan – you got to divide that by something over 1,000 – we bought a reasonable amount. We did sell it when it went up. It's higher than this now. It went up to 1.8 million, or something. I think it's around 2 million, 2.3 million or 2.4 million. The yuan went in our favor a little bit too. So we did a little bit better in dollars."


On why he sold IBM in favor of buying more Apple (AAPL):  "Well I was wrong on – at least I felt I was wrong on IBM. Now, I may have been wrong when I sold it, too. But I certainly was wrong when I bought it. And I've felt that Apple has an extraordinary consumer franchise. Apple's a different kind of business than IBM. They're both tech, obviously, in a major way. And they even have a joint venture, you know, on some things. But I think I understand consumer behavior perhaps better than I do the tech business. It wouldn't take much to beat it. And I liked it, I like Tim Cook very much. I like their policies. I see how strong that ecosystem is. It's to an extraordinary degree. I mean, I look at my grandchildren, my great grandchildren and everybody in the office, I mean, their families. I talk to the people at the Furniture Mart when the ten hadn't arrived, nobody goes over to, you know, buy an Android. I mean, you are very, very, very locked in at least psychologically and mentally, to the product you're using. I mean, you got all kinds of stuff up on there. It's a very sticky product."


On the airline industry (he owns stakes in AAL, UAL, DAL, LUV): "It's-- a business that's-- always subject to somebody doing something very dumb competitively. And—-- they've done it a lot in the past. There was more chance of them doing it when there were seven of 'em than the big ones, than-- than four. I mean, the industry was suicidally competitive for decades. I mean, they net lost money-- and-- while they were growing like crazy in units. And I was on the board of U.S. Air so I saw how it all happened. And it can turn into fierce competitive battles that'll wipe out earnings. Or it can be a business that's more decent, but still subject to lots of competition. And-- it's really hard to know, you know, for sure how it will develop. It's-- not risk free in their competition at all. In-- in the railroad business, all the tracks have been pretty much laid and all of that. So that settled into a business. Now, it's regulated and means that your earnings, you know, can only-- you're a common carrier. And-- many places, you compete with another railroad, and other places, you don't. And there're different rules that apply even in terms of pricing in those cases. But it's a perfectly decent business. It will lose volume in coal over time. And that's an important product. But it'll probably gain in other areas. So it's-- it's two different animals."


On stocks and volatility:  "Well, some people should not own stocks at all because they just get too upset with price fluctuations. If you're going to do dumb things because a stock goes down, you shouldn't own a stock at all ... But some people are not actually emotionally or psychologically fit to own stocks. But I think more of them would be if you get educated on what you're really buying, which is part of a business. And the longer you hold stocks, the less risky they become, whereas the longer the maturity of a bond, the more risky it becomes."

Here's a link to the full CNBC Warren Buffett interview transcript.

And for even more, be also sure to check out Warren Buffett's 2017 annual letter.

Stan Druckenmiller Interview: Likes Amazon & Tencent, Short Retail

CNBC's Kelly Evans recently interviewed legendary investor Stan Druckenmiller, who previously worked with George Soros and then started his own firm Duquesne (which he now runs as a family office).

Regarding interest rates, he says he wants to see normalization, not so much just rates rising, as he noted there's a difference between the two.  The former, he says, is about re-establishing a hurdle rate for investment.

"Bitcoin, art, wine, equities, credit... you name it.  Everything is one way up.  And there's huge distortions taking place and it's all in the name of this 2% inflation target. And when you get a misallocation of resources, it really hinders growth over the longer term."

He notes there's companies out there borrowing tons of money that shouldn't be and gave Steinhoff as an example (which he mentioned he had been short).

He doesn't own any bitcoin as he says he trades only what he knows.  "It's worth what people are willing to pay for it."

This year, Druckenmiller says he's done well in stocks but he's really mistraded macro.  "I'm not up double digits.  I'm having, relative to the opportunity set, a terrible year."  He's had a bad time in currency trading apparently but his excellent equities returns have bailed him out, so to speak.

Turning to equities for 2018, he doesn't buy the narrative that this is all about earnings.  He says it's all about central bank radicalism.

But for specific stocks, he really likes the stocks he owns long-term.  There's a lot of disruption going on in tech.  He's also been short retail throughout the year and he expects that theme to continue.

On the long side: "I love Amazon (AMZN).  This company, which everyone keeps quoting the multiple... is selling for less than 3x sales.  They're dramatically underearning.  You have to look at the long-term earnings power of the company.  I think (CEO Jeff) Bezos is incredible."

In China, Druckenmiller really likes Tencent (700.HK) as they're in payments, videos, cloud, gaming, and a huge platform (WeChat).  Like AMZN, they're also underearning and trading at 40x with a 40% growth rate, he says you're getting it at 1x growth rate.

Regarding Tesla (TSLA), he said he doesn't like to short great products (he gave himself one for his birthday a while back).  He questions the long-term financial model of the company, though.

On Apple (AAPL), he doesn't find it as exciting as AMZN, Facebook (FB), or Alphabet (GOOG).  He thinks AAPL might be overearning and doesn't own it but isn't short either.  He likes Workday (WDAY) as it fits into the new economy.

He doesn't think tax reform will impact the stock market as it's already priced in and anyways he feels the market is driven by central bank policy anyways.

Embedded below is the video of CNBC's full interview with Stan Druckenmiller:

.


You can also read the full transcript of the interview here.

What We're Reading ~ 10/4/17

The Four: The hidden DNA of Amazon, Apple, Facebook & Google [Scott Galloway]

The main fundamental skills of all investing [Collaborative Fund]

Skilled managers should hold fewer stocks [Institutional Investor]

Machine learning for investors: a primer [Alpha Architect]

Blue skies ahead for John Malone's LiLAC Group [Barrons]

Benedict Evans on the future of cars [EconTalk]

On the characteristics of aggregators [Stratechery]

Elon Musk versus the haters [Institutional Investors]

The new world of monopoly? What about flying? [Marginal Revolution]

Amazon makes up 43% of all online sales [Inc]

Millennials are moving to the suburbs, buying big SUVs [Bloomberg]

Media companies are finally getting serious about data and targeted advertising [Adweek]

Shopify is an excellent business [Tom Tunguz]

A negative piece on Shopify [Citron Research]

Warren Buffett, Charlie Munger & Bill Gates Interview

Becky Quick on CNBC recently sat down with Berkshire Hathaway's Warren Buffett for a one-on-one interview and then was later joined by Charlie Munger and Bill Gates for a discussion on a myriad of topics.  Here are some highlights:

Warren Buffett's Interview

-  Talked about technology stocks a lot at Berkshire's annual meeting.  Munger said they missed Google (GOOGL) and Buffett thought they should have had some insight into it because GEICO was a heavy user of it for advertising and paying per click.  He wasn't sure if there was a first mover advantage or if increased competition was going to come along (Bing, etc) or if there were going to be technological advances he couldn't understand.  "If I were forced to buy it or short it, I'd buy it.  Same with Amazon."

-  Apple (AAPL) shares were much more reasonable compared to future earnings so that's why he bought that tech stock.  Likens the consumer nature of the product as a way for him to easily tell what's going on with customer preference.  "You can't move people by price in the smartphone market remotely like you can in appliances ... the loyalty is huge."  Notes that most items are price sensitive (TVs, etc) but AAPL's products don't seem to be.

-  Recently highlighted how Buffett sold some IBM and he said that they've experimented with IBM's Watson at GEICO.  In that space you have to worry about somebody coming in and jumping ahead with the utility.  "The biggest value will come when it replaces human labor." 

-  Doesn't make trades on the basis of political election outcomes, doesn't look much at quarterly GDP numbers.

-  Railroad figures show the economy is doing 'OK', 2% rate or so.  Natural gas has gone up in price so that dictates the use of goal a lot of places, so coal shipments are up the most % wise. 

- Housing market is getting better, but not 'booming.'   Berkshire owns Clayton homes (manufactured homes), Acme brick, Berkshire Hathaway realty, Shaw flooring, Benjamin Moore paints. 

-  "Credit card volume will tell you a lot about the consumer., what their attitude is."

-  "Packaged goods has generally been a very profitable business."

-  Largest investor in four major airlines (UAL, DAL, AAL, LUV): Airlines have found a very high percentage of customers are price conscious.  Yet most consumers are captive to whatever airline flies the route they need to take.  Thinks consolidation of the industry has helped and it's no longer a 'suicidal business.'

-  "I have no idea what the market will do in the short-term."  They've got $95 billion sitting around and it doesn't make him happy that he's not earning anything on it.  Says it's getting tougher to buy businesses these days, "Once you buy a business, the business doesn't know what you paid for it."  "It's a very tough period to allocate capital."

- Says he's still cheap but not as cheap as he used to be. "You can afford to overpay a bit for a really fine business depending on your degree of certainty that it's a really fine business."

- Buffett says one thing he mentioned at the annual meeting no one really appreciated: that the five largest businesses today by market value ($2.5 trillion or more) you could run those businesses with no equity capital.  That's a completely different world than the past when industrial giants needed a lot of capital.

-  Didn't buy Amazon (AMZN) because of "stupidity."  Says he was impressed by Bezos long ago but didn't think he could pull off what he has.  On shares currently: "It's a big valuation ... I'm not buying any.  These are powerful ideas with big potential and he's executed."

-  One essential factor that determines what he thinks about market valuations: "The most important item over time in valuation is obviously interest rates."  "Anybody that prefers bonds to stocks today is making a big mistake.  It's ridiculous for somebody to buy a 30 year bond at these rates."

-  "Every smart guy is tempted by leverage, and some of them are broken by it."



Then at the end of Buffett's 1-on-1 interview, Charlie Munger and Bill Gates also joined Buffett to talk about healthcare, tax reform, mistakes they've made, and other topics.


Embedded below is the video of Warren Buffett, Charlie Munger, and Bill Gates's interview on CNBC:



For more from these investors, be sure to check out Warren Buffett's recommended reading list as well as Charlie Munger's favorite books.

What We're Reading ~ 5/3/17

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail [Christensen]

Warren Buffett's money managers Combs and Weschler speak [Yahoo Finance]

The new moats [Greylock]

Staying competitive as the world changes [Collaborative Fund]

A look at Seritage Growth Properties [Barrons]

Profile of Fidelity's Will Danoff [FT]

How Trump's pick for top Antitrust cop may shape competition [NYTimes]

Big name food brands lose battle of the grocery aisle [WSJ]

Thoughts on retailer L Brands [Intrinsic Investing]

Is the lingerie market on the verge of another disruption? (possible NSFW image) [Business of Fashion]

Amazon strategy teardown: building new business pillars [CB Insights]

UnderArmour tripped up in its run to become the world's next sneaker giant [Qz]

CEO pay is out of control [Fortune]

Apple's China problem [Stratechery]

With $6.2 billion spectrum spree, DISH's Charlie Ergen buys himself options [Bloomberg]

Can Facebook fix its own worst bug? [NYTimes]

Dyson is the Apple of Appliances [NYTimes]

Elon Musk's 2017 TED talk interview [YouTube]

What We're Reading ~ 4/26/17

The downside of managing downside risk [Morningstar]

A short guide to short selling [Dead Companies Walking]

James Montier: market fair value is 50% lower [Finanz und Wirtschaft]

On the many price fluctuations items see on online shopping [The Atlantic]

4 things that set successful CEOs apart [Harvard Business Review]

Using Eisenhower boxes to improve productivity [Quartz]

3 ways to build a culture of better decisions [CFA Institute]

Against all odds, the US tobacco industry is rolling in money [WSJ]

Refuting the short thesis on Apple [Bireme Capital]

Sprint said to look beyond T-Mobile for other deal options [Bloomberg]

Losses are the new black [L2 inc]

The unique advantage of equity investment [Fundsmith]

Profile of the founder of Chobani [CBS]

Millennials and credit: are we missing the real story? [FICO]

On being special in investing [Reaction Wheel]

What separates champions from 'almost champions?' [NYMag]

What We're Reading ~ 3/23/17

Mauboussin: The incredible shrinking universe of stocks [Credit Suisse]

7 traits for active investors to win in the long term [Jim O'Shaughnessy]

How to fight a price war [Harvard Business Review]

Stephen Jarislowsky's secret: buy stocks you never plan to sell [Canadian Business]

The fourth industrial revolution: a primer on artificial intelligence [Medium]

A pitch on Alphabet (GOOGL / GOOG) [Wexboy]

The autonomous vehicle revolution [Rational Walk]

Mohnish Pabrai thinks autonomous vehicles will take 20 years [Benzinga]

Baidu's (BIDU) CEO envisions a spinoff of robot cars arm [Bloomberg]

On Intel's (INTC) purchase of Mobileye (MBLY) [Stratechery]
Apple (AAPL) wants to bring augmented reality to the masses [Bloomberg]

Tech and entertainment in the era of mass customization [Andreessen Horowitz]

How being wrong can help us get it right [Tim Harford]

Advertisers are more interested in Instagram than Snapchat [Fortune]

Interview with Ctrip.com's (CTRP) CEO [Skift]

The billion dollar industry of professional video gaming [Bloomberg]

Soda loses its US crown; Americans now drink more bottled water [WSJ]

David Tepper: Market Multiple Kind of Full, Short Bonds, Long European Equities

David Tepper, founder of hedge fund Appaloosa Management, was interviewed on CNBC this morning.  Here's the highlights. 

Regarding the markets in general, Tepper said "Listen, I don't think the market is cheap by any stretch of a multiple, you can't say that.  On the other hand, with that backdrop of growth around the world, with the potential we'll do other things here, with the sugar that's still being put on by the ECB, BOJ and let's face it, the Fed is way low ...  You can't be short in that kind of setup.  I'm not suggesting the market is really cheap, but listen, it's hard to go short when you still have the 'drugs' being given.  The punch bowl is still full."  He went on to add, "On a multiple basis it's kind of full... I don't think the market's cheap." 

Regarding bonds, Tepper continues to be bearish and is short them: "If we're short US bonds, we're betting on a stronger economy here.  That's the bet.  Listen... bonds are really hard to own, the yields are really low."

Tepper also noted he bought Snap Inc (SNAP) shares in the IPO but sold on the spike higher.  "I'm not jumpin' through the hoop to buy it at $21.80.  But if it trades back down to the original offer price, I'd love to buy the stock there.  I'm a believer in the company, it's a valuation question to me.  Up near $30 it's too high for right now ... My youngest daughter loves the thing.  Anybody between 12 and 25 loves it, it's kind of anti-Facebook in that generation."

On Apple (AAPL): Trimmed the position due to concerns over China policy, but that shoe never dropped.  "I wouldn't be adding at $139."

He also likes Europe:  "I am long European equities, I could lose my behind.  There's upside people aren't recognizing.  It's a probability game to me.  (Valuations) are much much lower (than the US). 

On the Federal Reserve, he thinks they will raise interest rates more quickly.

Appaloosa now manages around $17 billion.  You can see the rest of their portfolio in the new issue of Hedge Fund Wisdom.

Embedded below are videos from David Tepper's interview with CNBC:

Video on the market:


Video on shorting bonds:


Video on the Federal Reserve:


Video on Snap Inc (SNAP):


Video on Europe & ECB:


Video on Apple (AAPL):


Video on regulation / tax cuts:

Warren Buffett Doubled Apple Stake in January: CNBC Interview

Berkshire Hathway's Warren Buffett sat down for an interview with CNBC's Becky Quick.  Earlier today we posted up Warren Buffett's 2016 annual letter which was just released.

Here's the takeaways from the interview:

- Between right before the election and now, he's bought $20 billion worth of stocks.  Wasn't driven by the election results or anything like that, all just individual equity analysis.  Thinks stocks are cheap given interest rates being where they are.  Would much rather have money be in stocks rather than Treasury bills.

- Has more than doubled his Apple (AAPL) stake in 2017.  Berkshire originally held a smaller position in AAPL (most likely from Ted Weschler and Todd Combs, his portfolio managers).  In the fourth quarter of 2016, Buffett ramped up buying Apple and established over a $6 billion position.  Now he says he doubled his AAPL stake in January.  He bought 120 million AAPL shares after previously owning 57 million shares at the end of 2016.  He now owns $17 billion worth of AAPL, but hasn't bought any shares since the most recent earnings report.  One of Todd/Ted owns an additional 10 million shares, so Berkshire's total exposure is now 130 million AAPL shares.

- Why did Buffett buy Apple?  "Because I liked it."  He also added that he likes CEO Tim Cook's ability to retain consumers and his capital deployment.  "Apple strikes me as having a sticky product, and an enormously useful product to people that use it."  Buffett himself doesn't own an iPhone.  "The continuity of the product is huge and the degree to which their lives center around (the iPhone) is huge."

- Commented he thinks Amazon.com's (AMZN) Jeff Bezos is the best manager out there.  Buffett doesn't own AMZN and admits it was probably a mistake, but he didn't buy because retail is a tricky business to figure out.  Buffett "doesn't have a good answer" for not investing in it.  He didn't understand the power of the model.

- "It absolutely baffles me who buys a 30-year bond."  Getting 3% for 30 years doesn't make sense to him.

- Thinks the typical hedge fund "2 and 20" fee model "is just ridiculous."  Says the fees make people rich, but won't make the investors rich.

- "Self driving cars will be adopted if they're safer. If they're safer, there's less in the way of insurance costs; that brings down premium volume significantly."  Says it will hurt GEICO's business significantly if it happens.  "If I had to take the over/under on whether in 10 years 10% of the cars would be self-driving, I'd take the under."  Lots of brains and billions of dollars being spent here, so it could come sooner than he thinks.  But admits it'll be negative for auto insurers.


Video 1 on Buying Stocks & Apple


Video 2 on Why Apple


Video 3 on Amazon


Video 4 on Treasuries


Video 5 on Hedge Fund "2 and 20" fee system


Video 6 on Self Driving Cars & Insurance


Video 7 on American Dynamism


For more from the Oracle of Omaha, check out Warren Buffett's 2016 annual letter which was just released.

What We're Reading ~ 2/22/17

Why we dig in with a long held belief instead of changing our minds [Reformed Broker]

Decision making amid uncertainty: improving your process [CFA Institute]

Inside the Snapchat roadshow [Business Insider]

On Quicken loans, the new mortgage machine [NYTimes]

China's artificial intelligence (A.I.) boom [The Atlantic]

Podcast with Ed Thorp [Meb Faber]

Prem Watsa drops long-held bearish stance on markets [BNN]

On Buffett's new stake in Monsanto (MON) [Bloomberg]

Warren Buffett's honor versus 3G [Lawrence Cunningham]

A look at Expedia (EXPE) [Value and Opportunity]

On owning a stock for five full years [Gannon on Investing]

Mark Cuban's two biggest stock holdings [Benzinga]

Apple: the greatest cash machine in history? [Aswath Damodaran]

Billions the TV show versus real life [The Ringer]

McLaren struck gold making supercars for regular drivers this year [Bloomberg]

Top 10 Stocks That Matter Most To Hedge Funds Per Goldman Sachs (Q4 2016)

Goldman Sachs' quarterly hedge fund trend monitor outlines what stocks matter most to hedge funds.  Here's the list as the fourth quarter 2016:


Top 10 Stocks That Matter Most To Hedge Funds: Q4 2016

- Alphabet (GOOGL / GOOG)

- Facebook (FB)

- Amazon.com (AMZN)

- Bank of America (BAC)

- Charter Communications (CHTR)

- Apple (AAPL)

- Microsoft (MSFT)

- Yahoo (YHOO)

- Time Warner (TWX)

- NXP Semiconductor (NXPI)


As you can see, it's quite tech-heavy.   The major exception is Bank of America (BAC), which was a consensus buy in Q4 among hedge funds we track in our newsletter.

For more on what stocks hedge funds have been buying & selling, check out the brand new issue of our premium newsletter that reveals the portfolios of 25 top funds.

What We're Reading ~ 2/16/17

Ed Thorp's new book: A Man for All Markets [Ed Thorp]

Seth Klarman weighs in on Trump [NYTimes]

Homeownership rate in 2016 was lowest in 50 years [Corelogic]

US household debts climbed in 2016 by most in a decade [WSJ]

Income share for the bottom 50% of Americans is collapsing [Marketwatch]

On the downfall of Toshiba, a nuclear industry titan [FT]

This free range short seller is making his comeback [Bloomberg]

Does Chipotle's valuation offer a margin of safety? [Rational Walk]

A whirlwind tour through trends in China [Andreessen Horowitz]

Beware Sears's zombie apocalypse [Bloomberg]

Inside Sears' death spiral [Business Insider]

Jeff Bezos wants Amazon to be the next HBO, Showtime [NYPost]

Tim Cook says augmented reality is a big idea like the smartphone [The Verge]

Bill Gates 2017 annual letter [GatesNotes]

Greenlight Capital's Q4 Letter: Dramatically Increased General Motors Position

David Einhorn's hedge fund Greenlight Capital finished 2016 up 8.4% and has returned 16.1% annualized since inception in 1996.

Their fourth quarter letter examines how their portfolio is positioned now that Donald Trump is president and will be trying to change policies. 

Greenlight is long various US value stocks that could benefit from corporate tax cuts (AMERCO, CC, Dillard's, DSW), they're long companies that can benefit from repatriation of foreign cash (Apple (AAPL)), and they're long companies that can benefit from demand for consumer durables (General Motors (GM), a position in which they've "dramatically increased their position."

They're also short 'bubble basket' stocks (Netflix), oil frackers, and Caterpillar (CAT).

Turning back to their thesis on GM, Greenlight writes that, "While the bears have been screaming 'peak auto' for the last couple of years, we think a strengthening job market will sustain the current upcycle and lead to better than expected credit performance at GM's finance subsidiary.  While the bears also cite long-term concerns over self-driving cars, we see a huge intermediate-term opportunity in assisted-driving cars."

During the quarter, David Einhorn's firm also exited its positions in AECOM (ACM), Michael Kors (KORS), and Take-Two Interactive Software (TTWO).   They also covered short positions in FLSmidth (Denmark: FLS), Mead Johnson Nutrition (MJN), and Reynolds American (RAI).

At the end of 2016, their largest positions in alphabetical order were: AerCap, Apple, CONSOL Energy, General Motors, and gold.  Their average exposures were 106% long and 81% short.

Embedded below is Greenlight Capital's Q4 letter:



We've posted up a bunch of letters today, so be sure to also check out Third Point's Q4 letter as well as Howard Marks' latest memo.

What We're Reading ~ 1/25/17

US investors favored passive funds over active by a record margin in 2016 [Morningstar]

The best investment writings of 2016 [Meb Faber]

On 3G Capital and the Kraft Heinz merger [Fortune]

A chat with Daniel Kahneman [Collaborative Fund]

Lunch with Bill Gates [FT]

What is your edge? [Base Hit Investing]

On expected risk [A Wealth of Common Sense]



Simon Property Group fights to reinvent the shopping mall [Fortune]

Facebook: Inside Instagram's reinvention [Recode]

Amazon expands into ocean freight [WSJ]

A pitch on Bolloré [Greenwood Investors]

Trump team compiles infrastructure priority list [McClatchy]

New FCC chief wants to destroy net neutrality [CNBC]

The great A.I. awakening [NYTimes]

Summary of some of the latest tech products featured at CES [Learning By Shipping]

Americans use debit cards twice as much as credit [Marketwatch]

China's biggest messaging app is on a collision course with Apple [TechInAsia]

How Social Cash made WeChat the app for everything [Fast Company]

When the Chinese come out to shop [OliverWyman]

How Netflix lost big to Amazon in India [Backchannel]

The best and worst airlines of 2016 [WSJ]

Carlos Slim's profit margins are right where Mexico wants them [Bloomberg]

Reasons to buy bonds in 2017 [Peter Lazaroff]

What We're Reading ~ 9/8/16

In-depth pitch on Liberty Global Latin America (LILA/K) [Find Me Value]

A second look at Amerco (UHAL) [Punch Card Research]

WD-40 (WDFC): a case study of the bubble in 'safe' stocks [Intrinsic Investing]

Analysis of Dell Technologies new VMWare tracking stock [Clark Street Value]

Morris Mark on four stocks he likes [Barrons]

Uber: from zero to seventy billion [Economist]

Google, Uber and the evolution of transportation [Stratechery]

Why electric cars will be here sooner than you think [WSJ]

How Apple's car could crack the automotive industry [Autocar]

Old article on capital allocator Henry Singleton [BrianLangis]

A look at the online travel industry [Phocuswright]

Why walking helps us think [New Yorker]

Inside Dyson's reinvention factory [Forbes]

Will Amazon kill FedEx and UPS? [Bloomberg]

On subscription retail [The Robin Report]

Theranos: how Elizabeth Holmes's house of cards fell [Vanity Fair]