Upon Further Reflection
By the time Warren Buffett's annual letter to Berkshire Hathaway (BRK.A) - Get Report shareholders hit at 8 a.m. on Saturday, I had three coffees lined up as I was ready to go to battle with other news organizations. My goal: Dominate coverage. Unfortunately, after making several posts before anyone else in a live blog I realized I was dominating coverage of a horrifically boring event. Talk about feeling deflated. At first blush, I thought this was Buffett's worst annual letter ever. He stopped writing a huge chunk of the letter, instead sending people to Berkshire's 10-K. There was a lack of trademark Buffett flair, save for the comparison of deal-hungry CEOs to the sex lives of teenagers. Buffett complained that he couldn't spend $116 billion, but offered no path forward on when a deal may happen and what interested him the most. No mention on what excites him about his growing Apple (AAPL) - Get Report position (Apple is an Action Alerts Plus holding). No insight into the thin press release detailing a new partnership with Action Alerts Plus holdings JPMorgan Chase (JPM) - Get Report and Amazon (AMZN) - Get Report on healthcare. Again, I felt totally deflated. But come Monday's ride into the office and some more reflection, I came to realize that Buffett's letter wasn't that bad. Not his best by any means, but not that bad. It was what he didn't say that is this letter's true brilliance. The fact Buffett can't find attractive companies (his bar is higher than a typical S&P 500 CEO) is a major signal that the broader market may be overvalued. That Buffett didn't acknowledge the recent correction suggests while he doesn't care about short-term stock price movements he is respectful that we may not be out of the woods just yet. Or perhaps her is just tired and wants to save the newsmaking for his annual shareholder's meeting later this year. Anyhow, food for thought: Coca-Cola's (KO) - Get Report market cap is $187 billion. Given Berkshire's cash pile, access to low-cost financing, and Buffett's affinity for Coke, why not make a play? Then drop the mic and hand off the ship to Greg Abel.
Qualcomm vs. Broadcom, Act 75
The new week kicked off right where last week's left off: a continuation of the dance between Qualcomm (QCOM) - Get Report and Action Alerts Plus holding Broadcom (AVGO) - Get Report . Here are a couple new wrinkles via a press release Monday from Qualcomm: (1) The two companies met again on Feb. 23; (2) Qualcomm's board said the "meeting led to further progress toward a possible negotiated transaction on key issues other than price"; (3) The two sides remain far away on price. As TheStreet discussed on its latest edition of its "Technically Speaking" podcast, Qualcomm has gained the upper hand in its battle with Broadcom (which is why you probably want to trade Qualcomm long). It's clear Broadcom is being lured into a much higher price for a target that looks like it has obsessed the daily life of Broadcom CEO Hock Tan. We await Broadcom's response.
Around the Horn
(1) Reminder to all investors to carefully read annual reports starting to hit the Securities and Exchange Commission's website. Language is changing due to tax reform and various accounting shifts. If you don't read them, it could be your loss down the line. Case in point is the latest gem from General Electric (GE) - Get Report filed on Friday. The company revealed profit hits to 2016 and 2017 earnings as part of a previously disclosed earnings restatement. There were also details shared on a host of lawsuits filed against the company and its former CEO Jeff Immelt. (2) China on the verge of going back to one-man rule has opened up the door for an indefinite reign for Xi Jinping. For multinational businesses such as Starbucks (SBUX) - Get Report , Apple and McDonald's (MCD) - Get Report doing business in China, the maneuver has to be viewed favorably as Jinping has largely been positive for business. That is until Trump's trade war with the country begins ...
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