There will be no coasting into the weekend, with Friday looking like a kitchen-sink kind of day for investors.
What we lack in big earnings news, with the bulk now past us, we’ll make up with data as big U.S. jobs numbers roll in, stronger than forecast, and then later we’ll get an ark full of Fed speakers. On Saturday, we’ll get Berkshire Hathaway’s BRK.A, -0.52% BRK.B, -0.36% annual meeting, and a chance to tap into the thinking of an all-time investing legend, the conglomerate’s billionaire chief executive and chairman Warren Buffett.
Opinion: This investor’s pilgrimage to Berkshire’s annual meeting is about more than Buffett
The so-called Sage of Omaha has already been busy, with Amazon AMZN, -0.56% up after he told CNBC late Thursday that “one of the fellows in the office that manages money... bought some” shares of the e-commerce giant. While Buffett himself didn’t push the button on that trade, he admitted being “a fan” and ”an idiot for not buying” the e-commerce giant before.
FOMO. Level infinity. pic.twitter.com/lYxhOf3waD
— Sven Henrich (@NorthmanTrader) May 3, 2019
Our call of the day, from Byron Lotter, portfolio manager at South African-based Vestact Asset Management, says Berkshire’s latest move holds an important lesson for investors, given the company has traditionally focused on value-oriented companies — stocks that tend to trader cheaper than fundamentals would warrant — and Amazon’s share price is fairly eye-popping.
“Look forward, don’t look back at what the share price has done. Looking at the company’s history is important, and just because it’s gone up and it’s done incredibly well, don’t let that deter you from buying a share,” Lotter told MarketWatch, in a telephone interview on Friday.
He said if Berkshire isn’t scared off by the fact Amazon shares trade at $1,900 each, neither should investors get intimidated by a share price, and sit on the sidelines because they think they’ve missed out.
“Investors think that because a share is trading at an all-time high and has a market cap of a trillion dollars, Berkshire wouldn’t be buying Amazon,“ he said. “When we were buying (Amazon) at $350 we thought it was high.”
Shares of Amazon, Vestact’s third-biggest holding have gained roughly 100% (ex-dividend) over 2 years, 517% over 5 years, 2,307% over 10 years and 2,109% over 20 years, according to FactSet.
“There’s still huge potential for this company. You have to look at where you think the company is going. Cloud services is in its infancy and so is online retail,” said Lotter.
He’s also a fan of Google parent Alphabet Inc. GOOG, -0.47% GOOGL, -0.58% which has seen a rough ride this week on disappointing earnings.“Google is growing at an expected 20% per annum, trading at 19 times earnings. In my opinion, it’s offering a lot of value.”
And another lesson from the Sage of Omaha? It also may be time for value investors to change their thinking a little. Berkshire has long stuck to companies that are considered less risky, with slow and steady growth, like American Express and Coca-Cola. That’s as opposed to growth stocks, companies with strong momentum like Amazon and Apple, which Berkshire also dipped into back in 2017 for the first time. Both those stocks though, have value qualities, argues Lotter.
“In this day and age, with so much information out there, and markets so transparent and liquid, if you stay in that deep-value box, you’re going to miss out and underperform the markets ,” said Lotter. “Gone are the days when you can find a quality company that has good potential trading at 10 times earnings.”
I may step on some toes here but I think Berkshire buying Amazon shares is a big blow for deep value. Value is not just about hard fundamentals anymore. Growth, transparency and a more holistic view of the bigger picture is required.
— Byron Lotter
