Posts Tagged ‘Cadbury’

A few thoughts on the Burlington acquisition

A few thoughts on the Burlington acquisition

Courtesy of Vitaliy Katsenelson at Contrarian Edge

warren buffettI have tremendous respect for Mr. Buffett.  But every word that comes out of his mouth should not be looked upon as prophecy, or the gospel truth.  I get a feeling that Buffett has been canonized into a value investor saint  – investors and the media worship the ground he walks on and the air he breathes.  The media are unable to get any critical quotes from his investors, and nobody wants to be caught disagreeing with the Oracle of Omaha – after all he’s been right more often than wrong – and so we only get positive puff pieces.  On the rare occasion when Berkshire Hathaway stock declines more than the market, you see an article asserting that “Buffett has lost his magic touch,” but these articles are usually followed by stellar performance by Berkshire.  Though Buffett deserves admiration – he is brilliant and likable and he has achieved incredible returns for his investors over the last half-century – he should not be canonized, and not everything he does or says is the ultimate truth.  

Most investors agree with Buffett’s criticism of Kraft’s decision to buy a fairly valued (or overvalued) Cadbury at 22 times earnings (over the past 15 years, its average price-to-earnings ratio has been 21), using Kraft’s undervalued stock.  Cadbury runs a global, noncyclical confectionary business that, if properly managed, should have a very high return on capital.  Buffett, a shareholder of Kraft, was very public about his dismay – he said he felt poorer when Cadbury accepted Kraft’s increased offer.  

 But though many agree with Mr. Buffett’s assessment of the Kraft/Cadbury deal, investors and media are completely ignoring Berkshire’s own, $30-billion-plus acquisition of a very cyclical, capital-intensive, not terrifically high-return-on-capital business – Burlington Northern.  A railroad for which Mr. Buffett’s Berkshire will lay out 18 times earnings (over last 15 years its average P/E was 15); and to make it even worse, part of the deal will be financed by issuing what Buffett recently called “cheap” Berkshire stock.  Burlington stock is not cheap, it is fairly priced at best, and likely overpriced.  Also, Buffett owning Burlington Northern will not make the railroad business any more valuable.  There is little value to be unlocked in this business, and Buffett will practice his usual hands-off approach. 

Though Mr.…
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Warren Buffett & Bill Ackman Interviews

Warren Buffett & Bill Ackman Interviews

Courtesy of Market Folly

Warren Buffett of Berkshire Hathaway and Bill Ackman of hedge fund Pershing Square recently sat down with CNBC in two separate interviews. While the two men shared a talking point in the recent Kraft deal (they are both large shareholders), we thought it was interesting to hear their recent takes on the economy and markets.

In his interview, hedge fund manager Bill Ackman says that you are buying Kraft (KFT) at less than 14 times earnings and get a 4% dividend yield. He liked the fact that Kraft used a limited amount of shares (and used more cash) in the deal and in the end paid a fair price to get the deal done. As we covered earlier, Kraft is now Pershing Square’s largest holding.

Ackman argues that Kraft’s purchase of confectioner Cadbury now makes Kraft a more ‘defensive’ play. Obviously it will take a bit of time to integrate the two businesses, but the Pershing Square hedge fund manager points out that Kraft has done it numerous times before with other transactions.

Embedded below is Ackman’s video interview where he outlines his thoughts on the Kraft and Cadbury deal. RSS & Email readers will want to come to the site to view this post as there are a lot of videos included:


 

And here is part two of Ackman’s video interview where he talks about some of his other portfolio activity and his take on the economy:

Moving next to Warren Buffett, we see that he shares a different opinion on the matter of the Kraft and Cadbury deal. Below he gives his thoughts on Wells Fargo (WFC), the economy, Ben Bernanke, and much more.

 

We’ve followed these two gentlemen extensively before and have covered numerous resources such as Warren Buffett’s recommended reading list, Pershing Square’s research on General Growth Properties (GGWPQ). For more insight from these two big time investors, head to our resources on Warren Buffett as well as our resources on Bill Ackman.

Market Folly

 


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Phil's Favorites

Up and Down

 

Up and Down

Courtesy of 

This stat from @SentimentTrader blew me away:

“The S&P 500 fund, SPY, has been up at least 0.5% for 5 straight days. That’s tied for the longest streak since its inception.”

I wasn’t taken aback because of how strong the markets have been recently, but that streak of five days sounded really small to me. I almost couldn’t believe it was right. But after looking at the data, the shock wore off.

The S&P 500 has gained >0.5% on 28% of all days (going back to 1993), so the likelihood of...



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Biotech/COVID-19

Is the COVID-19 pandemic cure really worse than the disease? Here's what our research found

 

Is the COVID-19 pandemic cure really worse than the disease? Here's what our research found

The economic impact of coronavirus restrictions can also take a human toll. mladenbalinovac via Getty Images

Courtesy of Olga Yakusheva, University of Michigan

The Research Brief is a short take about interesting academic work.

The big idea

The coronavirus pandemic catapulted the country into one of the deepest recessions in U.S. history, leaving millions ...



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Zero Hedge

Bob Shiller: Understanding The Pandemic Stock Market

By Robert Shiller at Project Syndicate

As posted at ZeroHedge

The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.

The performance of stock markets, especially in the United States, during the coronavirus pandemic seems t...



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ValueWalk

Financial Stress Is The Second Global Crisis We Are Facing

By Jacob Wolinsky. Originally published at ValueWalk.

No matter what level of income you’re on, a global financial crisis can be extremely stressful for anyone. It boils down to one simple reason; uncertainty.

Q2 2020 hedge fund letters, conferences and more

Humans hate uncertainty. In fact, a study in 2016 showed that humans find uncertainty even more stressful than knowing something bad is definitely going to happen. Uncertainty causes a huge amount of stress on the human body, and i...



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Kimble Charting Solutions

Here's Why QQQ and Large Cap Tech Stocks May Rally Another 10%!

Courtesy of Chris Kimble

The long-term trend for large-cap tech stocks remains strongly in place.

And despite the steep rally out of the March lows, the index may be headed 10 percent higher.

Today’s chart highlights the $QQQ Nasdaq 100 ETF on a “monthly” basis. As you can see, the large-cap tech index touched its lower up-trend channel support in March at (1) before reversing higher.

It may now be targeting the top of the trend channel at (2), which also marks the 261.8 Fibonacci extension (based on 2000 highs and 2002 lows). That Fib level is $290 on $QQQ.

If so, this upside target for $QQQ is still 10% above current prices. Stay tuned!

This article was first written ...



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The Technical Traders

Big Funds to Pull Money OUT of Stocks: 2nd Wave to Hit Economy

Courtesy of Technical Traders

TOPICS IN THIS INTERVIEW:

-Big funds to pull money out of markets.

-Falling dollar to really start to benefit gold

-Gold miners showing signs of life.

-$2,000 gold will change people’s mindsets in gold.

-Gold or silver-backed currency will send metals through the roof.

Get Chris Vermeulen’s Trades – Click Here

...

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Chart School

Golds quick price move increases the odds of a correction

Courtesy of Read the Ticker

Every market corrects, maybe profit taking, maybe of allowing those who missed out, to get in!


The current open interest on the gold contract looks to high after a very fast price move, it looks like 2008 may be repeating. A quick flushing out of the weak hands open interest may take place before a real advance in price takes place. The correction may be on the back of a wider sell off of risk assets (either before of after US elections) as all assets suffer contagion selling (just like 2008).

This blog view is a gold price correction of 10% to 20% range is a buying opportunity. Of course we may see  a very minor price correction but a long time correction, a price or time is correction is expected, we shall watch and...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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