Roger
Business Owner, Former Assistant Research Professor
Berkshire Hathaway's capital allocation has changed for the worse under new leadership, as its $8.5B all-cash Taylor Morrison acquisition buys a homebuilder just as home prices reverse, new homes lose their premium and goods and commodity inflation takes off. Its large Alphabet stake looks similarly unwise. x.comÂ
Berkshire Hathaway has become a disaster under new leadership, effectively buying when others are greedy and selling when others are fearful. Its 13F shows it built massive positions in Domino's Pizza and Constellation Brands, then sold them at the current bottom for about a $1 billion loss, likely with other big losses too. x.comÂ
Alphabet's higher capex guidance compounds the risk that already demanding revenue estimates must fall. The Street expected 25% revenue growth in 2027 and 21% in 2028; as 2028 earnings consensus resets, a 10% stock decline could be justified. x.comÂ
Alphabet's surging AI capex is outpacing its payoff. Its first double earnings miss in four years came with free cash flow of -$9.1 billion versus -$2.7 billion expected, long-term debt up 479% in a year to $125.1 billion, and guidance for significantly higher 2027 capex above $300 billion. x.com x.comÂ
Berkshire Hathaway benefits from a flight to low-beta quality stocks that are not burdening themselves with AI debt. Its shares are up 10% in October, while three of its largest holdings, Apple, Coca-Cola and Chevron, have been surging. Boring pays. x.comÂ
Alphabet is hard to bet against now that Berkshire Hathaway has recently bought the stock, a strong vote of confidence. x.com x.comÂ
Alphabet's AI capex payback is being repriced, making its post-earnings decline more than a one-day mood swing. Guidance and cloud and AI margin commentary are the near-term tests. If growth continues but the multiple compresses, the risk is duration in mega-cap AI, not a collapse in technology growth. x.comÂ
Berkshire Hathaway's purchase of Taylor Morrison is a big win even after a 24% premium, because the price is still about 10x earnings. That is $72.50 a share against current EPS of $6.70, a good job by Greg Abel. Jim Cramer's suggestion that Berkshire put Clayton prefab homes on all of Taylor Morrison's land is the big idea. x.com x.comÂ
Alphabet's earnings weakened the investment case because it missed on YouTube, Search, services, subscriptions and earnings, while reporting $0 in buybacks and double the negative free cash flow of last quarter. Cloud revenue was impressive, but Alphabet is a hold here and needs to come down significantly before adding. x.comÂ
Increasing AI spending looks set to weigh on Alphabet shares. Cash-flow burn is the key reason to expect a post-earnings decline. x.com x.comÂ
Property and casualty insurers such as Progressive and Kinsale are much better buys than Berkshire Hathaway, whose Buffett premium is evaporating. Almost any insurance stock or broker is a better deal now. Around $470, Berkshire is only a nibble and a slightly better option than the S&P 500, though it should sell off less in a bad market drawdown. x.comÂ
AI answers cost Alphabet more to serve than traditional search results, adding a bigger bill to the risk of fewer ad clicks. Higher prices per click could offset some lost clicks, but growing capex has pushed free cash flow negative; the 2027 spending concern is not going away. x.com x.com x.com x.com x.com x.comÂ
