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- đď¸ Buffett's Letter
đď¸ Buffett's Letter
[5 minutes to read] Plus: Reddit embraces meme stock traders
By Matthew Gutierrez and Shawn OâMalley
If youâve ever looked around and thought, âthere are too many people on this planet,â well, you probably donât live in one of the 757 U.S. counties where there are more cattle than humans.
In another 593 counties, chickens are the most common âdomesticated animalâ (that includes people).
In 60 counties, there are more turkeys than anything else, sheep in 9 counties, and goats in 5. And there are at least 2 counties with more ducks than people.
đ Our Chart of the Day shows more â the longer you look at it, the more it reveals about different regionsâ geographies and economies.
â Matthew & Shawn
Hereâs todayâs rundown:
Today, we'll discuss the biggest stories in markets:
Berkshire Hathawayâs earnings & Buffettâs new letter
Reddit embraces meme stock traders
This, and more, in just 5 minutes to read.
POP QUIZ
In The News
đ° Berkshire Hathaway Operating Earnings Jump 28%
In his latest annual letter to shareholders, Warren Buffett remembered Charlie Munger both as the âarchitectâ of Berkshire and as a cherished partner.Â
A touching tribute: Buffett explained how Munger recommended in 1965 that Buffett add âwonderful businesses purchased at fair pricesâ to the struggling textile business that Buffett had taken control of.
âWith much back-sliding I subsequently followed his instructions,â Buffett, 93, wrote.
Berkshire has grown to become the seventh-largest U.S. company by market value, and Buffett credited Munger for helping it get there.
âCharlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades,â Buffett wrote. âIn a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he neverâneverâreminded me of my mistake.â
What to know: Buffett said Greg Abel and Ajit Jain would join him on stage at the annual meeting in Omaha this year. The event, the âWoodstock for Capitalists,â is set for May 4. Abel and Jain respectively lead Berkshireâs noninsurance and insurance businesses.
Berkshire released its results for 2023, reporting a profit of $96.2 billion, plus operating earnings that rose to $37.35 billion, thanks largely to the companyâs insurance business.
Berkshire recently trimmed its large position in Apple while adding to Chevron and Occidental Petroleum.
The company maintained its big holdings of Bank of America, American Express, and Coca-Cola.
Berkshireâs stock has soared lately. Class B shares are up 17% this year vs. 6.7% by the S&P 500. Both Class A and Class B shares hit records on Friday.
Why it matters:
Investors study Buffettâs every move because, well, heâs the best in the biz.Â
Sittinâ on cash: Berkshire ended 2023 with a record $167.6 billion in cash and equivalents.Â
Buffett wrote in his letter that Berkshireâs big size and increased competition from other investors have limited opportunities.
âThere remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,â Buffett said. âSome we can value; some we canât. And, if we can, they have to be attractively pricedâŚAll in all, we have no possibility of eye-popping performance.â
Three key quotes from the Oracle:
âPanics wonât happen often â but they will happen. Berkshireâs ability to immediately respond to market seizures with both huge sums and certainty of performance may offer us an occasional large-scale opportunity.â
âOne investment rule at Berkshire has not and will not change: never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been â and will be â rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes.â
âAt Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies â and simply sitting tight â can deliver wealth almost beyond measure.â
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đ Reddit Embraces Meme Stock Traders
Whatâs the opposite of Warren Buffett? Probably meme stocks, and the home to meme stock traders â Reddit, aka the front page of the internet, filed for an IPO last week.
Itâs a big deal not just for investment bankers who hope Reddit can reverse a fledgling IPO market where new stock listings have been welcomed less than enthusiastically but because itâs the first major social media company to go public since Pinterest in 2019.
Court drama: Coincidentally, the announcement overlaps with landmark Supreme Court cases on the First Amendment and how it applies to social media companies. Specifically, whether they can remove controversial content/politiciansâ accounts and whether states can sue social media companies for content moderation.
The debate boils down to whether social media companies are seen as private publishers able to curate content at their own discretion or are more like public utilities that must act as a âtown squareâ for all.
Why it matters:
As the saying goes about social media businesses, you are the product, and nowhere is that arguably more true than Reddit, where over 60,000 moderators (âmodsâ) manage thousands of communities (subreddits), ranging from the infamous Wall Street Bets to memes, fitness, politics, and other manifestations of internet culture.
Despite working for free, mods are critical to the platform, filtering out spam, setting the rules for a subredditâs engagement, and moderating conversations.
Reddit has a rather half-hearted solution for its dependence on an army of unpaid internet workers: Reserving 75,000 shares from its IPO for its most active Redditors.
The catch? This isnât the type of stock-based compensation employees get. Instead, itâs merely an early opportunity for Redditors to buy the companyâs stock at full price, providing funding directly to Reddit, which has never been profitable since its launch in 2005.
While Reddit mods happily volunteer their time, it is, as Bloombergâs Matt Levine puts it, a bit âawkwardâ that the IPO will likely value Reddit at roughly $5 billion, yet mods donât share in the revenue earned from ads shown on their subreddits.
The chance to buy in early into an IPO can be valuable â especially if the stock surges in its first few days of trading. But itâs little consolation after last yearâs tensions between corporate Reddit and its users following crackdowns on third-party developers.
More Headlines
đ Farmersâ protests continue across Europe
â FTC sues to block Kroger + Albertsons merger on concerns about higher prices and hurting workers
𧊠With liquidity scarce, venture capital funds are getting creative to return capital
âď¸ Tiffany & Co.âs rise to household name via the Trans-Atlantic telegraph
đ BP execâs husband guilty of insider trading $1.8 million after overheard phone call
đ˘Â Why the apartment boom wonât bring down rent for many
Quick Poll
Are you interested in investing in Reddit amid its IPO? |
On Friday, we asked: Would you ever give your money to a big hedge fund like Citadel?
â While results were virtually 50-50, most people who said ânoâ said things like âI know waste when I see itâ and âFEEs, fees, and more fees! Hedge funds over-promise, over-charge, and under-deliver.â
â Another wrote: âKen Griffin and Citadel are overrated.â
TRIVIA ANSWER
See you next time!
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