Sp3cul8r
Stock Trader, Author of Trading Toward Financial Freedom
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
Apple's price is held up by index dispersion and gamma positioning rather than its business value. Its supposed bull case is that, as a non-AI name, it moves inversely to AI stocks; only flows strong enough to break the gamma grip permit price discovery. Fair value is 75% below the current price. x.comÂ
Berkshire Hathaway is built for long-term survival rather than maximum returns, earning a Risk Shield rating of 95/100 that puts it in the top 5% of stocks globally. Growth is average and quality only slightly above average, but the balance sheet holds a record $397 billion of cash, 31% of total assets, with negative net debt, low beta and low volatility. x.comÂ
Berkshire Hathaway's recent bets show impressive mental dexterity, but they are still small dollars for a company its size. It bought Alphabet above its long-term average multiple, at more than twice its price of a year earlier, perhaps the highest multiple Berkshire has paid for an investment that size, apparently betting on good returns from roughly $200B of growing AI capex. It also bought Delta despite Buffett calling airlines a mistake after COVID. x.com x.comÂ
Berkshire Hathaway is a hedge for a tech-heavy portfolio against a tech correction, an oil shock or an inflation spike. It offers defensive exposure to insurance, energy and rails, a cash pile of over $350 billion that makes it an optionality machine, and a culture of discipline and compounding that should outlast Buffett. Possible bad surprises from the Iran conflict make that protection worth having during inevitable rotations. x.comÂ
Berkshire Hathaway's return to net stock buying makes bearishness hard to justify. It beat earnings, repurchased $4.5B of its own shares and was a net buyer of about $20B in stocks, ending 14 straight quarters of net selling. x.comÂ
A mix of Marvell, Broadcom, Amazon and other Big Tech is likely to outperform Berkshire Hathaway with relatively low risk in the years ahead, extending Berkshire's heavy underperformance versus a basket of Big Tech. x.comÂ
Berkshire Hathaway may be the best hedge against an AI bubble or macro shock, because $400B of cash and a defensive portfolio make outperformance inevitable in that scenario. The company is a financial fortress. x.comÂ
Berkshire Hathaway is not a company to bet against after a strong Q2. Investment gains nearly tripled year over year, from $6.36B to $16B, net income more than doubled, and buybacks jumped from under $300M last quarter to $4.5B. x.com x.comÂ
Berkshire Hathaway risks another five years of returns decimated by big tech, which is too strong. Greg Abel should study Jensen Huang every day, or it will come at great cost to shareholders. Berkshire is more than an insurance company now, and missing Google and Amazon, which it has acknowledged as mistakes, was bad in the long run, not just the short run. x.com x.com x.comÂ
Apple has the most predictable cash flows, including future cash flows, and that dependability appears to be what investors reward. Its P/E is about 40 versus 27 for Nvidia, 22 for Meta and 16 for Alphabet; Meta's free cash flow has turned negative. Leveraged build-out companies have been hit hardest while Apple has outperformed, but Apple investors could be wrong and the point at which its premium becomes too high remains open. x.com x.com x.comÂ
