And why shouldn’t it?
In the past I have repeatedly mentioned that with the strong economy, lower tax rate, healthy consumer finance and strong business confidence largely significant de-regulation since Mr. Trump took office (and to be sure, no main stream media will ever mention this), the overall economy is heading the right direction, corporate earnings will, too. (See previous post published on Feb 26, 2018: How do you invest when we are 8 years into this current cycle)
However, the stronger corporate earnings don’t necessarily translate to strong stock price performance, especially true for lots of technology stocks which are priced in even stronger earnings growth.
Almost 70% of the US GDP come from non-gateway cities (New York, San Francisco, Boston, Chicago, Seattle etc). Berkshire Hathaway is probably the best conglomerate that can represent these economic activities in US economy and 2018 onwards, it will be “years of the main street’s gains”.
S&P 500 index components are largely overvalued with exceptions of BRK or some high quality retail stocks. And that is going to be the key to beat the benchmark over next few years and deliver outsized return.
My fellow investors, next time if you want to try some ice cream in this hot summer, please try Diary Queen; if you would like to buy a car insurance, please try GEICO (recently i switched to GEICO, and cut my car insurance premium to half with same level of coverage); if you would like to ship some goods through railroad, please try Burlington Northern Santa Fe (BNSF); if you would like to sell your houses, let Berkshire Hathaway Home Services (or Houlihan Lawrence if you are in tri-state area); if you want to buy some batteries, Duracell is pretty good; if you want to buy a box of chocolate for your loved one, See’s Candy is #1 choice. And new Apple iPhone will come out in September, do make sure to check it out. It is going to be “Yuge”.
It is the collection of these great businesses make BRK such a good representative of American’s economy, which is doing great.
Always remember that you are a proud co-owner of a collection of great businesses through Berkshire Hathaway. And that will make you sleep well and live well too because these business are darn good than their competitors.
On the other less-covered news from Berkshire, they extended a $2-bn credit facility to Seritage Growth (SRG) at a fixed rate of 7% coupon. As a BRK co-owner, I am happy that $2bn of the cash are put to work at a reasonably attractive risk adjusted position.
As a SRG Pref Stock owner, I think the SRG Pref Stock should be traded at par now (which we bought at a discount to par of about 12% and enjoyed more than 10% safe, well covered dividends since then).
This is how you put your capital to work.