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  • Martin Sosnoff

Apple and Berkshire Overplayed And Overowned

By now, everyone knows Warren Buffett owns a big chunk of Apple and is happy with it. But, as a stock, Apple has churned past year with no gain to speak of. You woulda done much better in General Motors, up a snappy 30% from a year ago. 


I possess no forecasting powers on sector demand for cell phones, but the sector does look a little toppy. Years ago, the market believed saturation for cell phones was 10% of the population, not the present 100% or more. Nextel sold for 5 bucks, then hit  mid-thirties and bought out. 


If I can’t model a company's earnings for three years or so, I won’t play ball. For me, no dice in Netflix, Meta-Platforms, even Eli Lilly. I can model Microsoft, but not Nvidia. At home with General Motors, American International Group, but not Tesla. Goldman 

Sachs and Amazon suck out my money. They’re understandable, high powered players in their operating sectors. Berkshire is certainly understandable, but so what?


Not thrilled with the bread ‘n butter operating businesses they control.  Apple could underperform. Lest we forget, the market sells at 20 times forward 12-month numbers. 


I can make a better case for the FRB keeping its hands in its pockets on interest rates. With the exception of GM I don’t see consumer cyclicals attracting fresh money. Everyone’s busy trying to figure out Tesla and its ilk. 


I missed the rally in bank stocks because I felt the financial sector didn’t carry any earnings leverage in a wishy-washy economy. My exception was AIG, making new highs, weekly. This was a desperate defensive ploy. I needed an offset to soaring insurance rates, particularly in homeowners policies. Protection for a fine arts collection is formidable, too. 


This is the same ole AIG that had to be bailed out by our Treasury. Billions upon billions involved. Our major banks scrambled to insure home mortgages, whose financial backing proved phony.


Today, AIG as a stock is zippy, in new high ground, weekly. Decades ago JP Morgan refused my mortgage request as too risky. I recently retired this loan made 30 years ago, fully repaid to Citigroup.


I’m a frightened player these days. I can’t make a call on whether the bubbling pot of international conflicts breaks out into wide-scale warfare. If it does, assume the market sell off would tot up to at least 20%. More pricey growthies do get cut in half and still sell at pricey levels. 

Markets don’t normally bottom until after they plumb book value and sell at 10 times earnings. This was true for the Cuban missile crisis and in the more recent bubble in our mortgage banking system.


The expression we used then,  “Who cares?” Nobody cares! At that point, you’re supposed to sweep in and Buy! Buy! Buy! But how many Buffetts around with ready capital?


In the Cuban Missile face-off with Russia, some 60 years ago, I didn’t have more than a thimble-full of ready capital. So I bought a handful of stocks on margin.  Xerox, IBM et al. Then, I walked home across the Brooklyn Bridge to Pierpont Street pondering whether I was OK or tap city. The ticker tape still chattered 4 hours late.


OK! Wise guy.  Now that you carry some gelt, what’s to do if panic unfolds while we’re asleep?


Fair question. I’m already positioned in equities, but won’t go above 50% long. Do own some growthies, Amazon and Alphabet.  One hold in financials,  Goldman Sachs.  Enterprise Products Partners is my energy play and then Microsoft, which sells closer to 20 times earnings than 30 times earnings. Amazon too. 


What’s missing? Well, Apple, Meta,Tesla, Netflix, and Nvidia. No banks, zilch in healthcare. I’m 75% invested adjusting for volatility. I’d still get bruised but not carried away, lifeless. 


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paulblock
13 may

Always brilliant. Always on target!

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