As a musician, I loved hearing and reading about the legendary Woodstock music festival in 1969.
It was long before my time, but that didn’t matter. Generations to follow heard plenty about the 400,000 people on Max Yasgur’s dairy farm in upstate New York, the rains and mud, the drugs, and of course the music.
It was a who’s who of defining artists. The Who, Jimi Hendrix, The Grateful Dead, Crosby, Stills, Nash, and Young. And so many more.
As an investor, I love hearing about “Woodstock for Capitalists” – Berkshire Hathaway’s annual shareholder meeting where folksy and brilliant Warren Buffett spins yarns, shares insights, and tells shareholders how much money they’re making.
It’s a who’s who of defining investors… because Warren Buffett is there. And up until this year, he was joined by his longtime co-investor, Charlie Munger, who died last November.
In one of those truth is stranger than fiction stories, Warren Buffett started investing in Berkshire Hathaway – then a textile company – in 1962. He calls it his dumbest stock investment. He eventually gained control of the company in 1965 and tried to make the textile business work but failed.
Now Berkshire invests in and owns other companies, is valued at nearly $900 billion, and its A shares cost a mere $615,000. Thank goodness for the B shares, which are much more affordable at $408.
At 93 years of age now, Buffett seems as sharp and up to date as ever. His words still carry more weight than any other investor on the planet.
Last weekend, he tapped into the dark side of artificial intelligence. He said that we let the genie out of the bottle developing nuclear weapons, and that AI is “somewhat similar – it’s part way out of the bottle.”
At the same time, his firm is embracing the bright side of AI by using it to increase employee efficiency. AI’s ultimate impact on jobs is a hugely important story, and we’ll talk more about that in our next Power Trends on Saturday.
Just like we all watch every Fed meeting these days, we also all track Berkshire’s annual meetings and portfolio moves.
If you’re one that likes to follow the Oracle of Omaha, here are some of his latest buys and sells analyzed through the latest data and scores of my Quantum Edge system.
Selling Paramount
You have to love Warren Buffett’s genuineness.
At the shareholder meeting, Buffett said Berkshire sold all remaining shares in Paramount Global (PARA) and lost “quite a bit of money.”
Specifics weren’t disclosed, but that probably means between $1 billion and $2 billion.
In 2022, Berkshire invested $2.7 billion in PARA, and Buffett didn’t shift blame. “I was 100% responsible for the Paramount decision.”
Even the best are wrong sometimes. My whole goal is to have more winners than losers – I target a 70% win rate based on use and back testing of my Quantum Edge system – and to have my winners make me a lot more than my losers cost me.
Buffett has clearly done that through the years, and my data agrees with his decision to move on from PARA. With a Quantum Score of 46.6, there are better opportunities out there.
Source: TradeSmith Finance and MAPsignals.com
Both the fundamentals and technicals are subpar – especially the nearly 70% decline in earnings the last three years – and my system has detected just one Big Money buy signal this year compared with seven sell signals.
Still Buffett’s Biggest Holding
Berkshire sold 13% of its Apple (AAPL) shares in the first quarter in anticipation of higher taxes. Most of those shares were bought between 2016 and 2018 and are sitting on big gains.
Taking some of those profits now theoretically means paying a lower rate… should taxes increase.
But Buffett is not down on the company. In fact, just the opposite.
AAPL remains Berkshire’s largest holding – by far – with 790 million shares worth about $145 billion. That’s a sizable 40% chunk of Berkshire’s equity portfolio… and more than 3.5 times bigger than the second-largest holding, Bank of America (BAC).
Taking some profits in AAPL makes sense from both the tax standpoint and when analyzing potential upside. Its 53.5 Quantum Score is not bad, but it’s not great either. Both the fundamentals and technicals are also meh.
Source: TradeSmith Finance and MAPsignals.com
Apple was one of the stocks I got tested on in yesterday’s Power Trends+ video when Luke and I went head-to-head against our system. You can watch it here.
Bank of America scores much better with its 74.1 Quantum Score. Notice that it’s a bit overweighted by the exceptionally strong technicals.
Source: TradeSmith Finance and MAPsignals.com
But I’ll let you in some “inside baseball” knowledge about the system. The fundamental rating is penalized by high debt, and that’s just a fact of life when it comes to financials.
Sure enough, BAC’s debt is 215% of equity.
I generally avoid financials for that reason, but most everything else looks pretty good for BAC.
Rating the Stalwarts
Buffett was unreserved in his praise for Apple, calling it “an even better business” than two of his long-time holdings – the “wonderful businesses” of American Express (AXP) and Coca-Cola (KO).
He’s owned these stocks for more than 30 years. And how do they look today?
I’ll give Buffett an A+ for AXP, which he started buying way back in 1991 when it was around $7 per share. It has gained more than 3,000% since then to today’s prices around $240… and it’s still a great stock with a Quantum Score of 81.
Source: TradeSmith Finance and MAPsignals.com
Shares have been on the move since the big rally started in late October, rallying more than 70% with 18 Big Money buy signals along the way. Debt is higher than I like to see, but strength pretty much everywhere else offsets that.
I’m less enthusiastic about Coke, but it looks solid if not spectacular.
Source: TradeSmith Finance and MAPsignals.com
That 62.1 Quantum Score is pretty good, and the fundamentals and technicals rate similarly. KO does carry pretty big debt at 167.4% of equity, which knocks down the fundamentals a little bit.
Shares got hit with 13 Big Money sell signals last September and October, but they have rebounded back up near 52-week highs, and I see five buy signals so far in 2024.
KO is a good stock, but for new money, I see better opportunities available.
It’s All About Owning the Best
Warren Buffett is not a quantitative investor, but one thing we have in common is our desire to own the highest-quality stocks in the market. As he has said before, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
He’s one of the best ever at finding those companies – even ones that turn out to be duds. Nobody can expect to replicate his success, which is why I use the power of technology, data, and algorithms to find these best-of-breed stocks.
As someone reminded me just today, my goal was pretty simple: I just wanted a system that tells me when I log on every morning which stocks are the best ones to buy.
That’s why I spent many years and dollars developing the Quantum Edge system. It’s worked great, and I would never buy a stock without first checking the Quantum Score and other data.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
