A weak NY Federal Reserve Manufacturing number did not slow down traders moving this market higher today. Volume was mixed, but higher on the NASDAQ composite. Even with a less than ideal close the NASDAQ came away with a solid session. Crude oil pushed higher today as supply concerns noted by Goldman and issues in Nigeria were reasons for higher prices. SPY lagged the broader market today closing just below Friday’s high. Despite the close the S&P 500 was still able to close above its 50 day moving average along with the Dow. The NASDAQ still remains below both its 50 day and 200 day moving average. Today was a good start to the week, but we will need to see this market continue to push higher.
The only major market index still below both major moving averages remains the NASDAQ. Even the Russell 2000 is above its 50 day moving average. Perhaps the real story of the session was AAPL’s 3% move today after Warren Buffett announced a stake in the company. We can’t say this is a surprise move as AAPL is really cheap in every metric. However, the stock is over-owned and while its never a negative to have Buffett invest in your company it really is a desperation move. Remember, Buffett’s favorite holding period is eternity or FOREVER. If you can’t hold the stock forever than you need a different game plan.
The other big play out there continues to be MGT. Today was another fabulous day for traders who have been playing this stock on the long side. It does appear $3 mark is a tough nut to crack and presented a lot of resistance today. We have no idea where this stock is headed long term, but do not be surprised if we see this thing consolidate its recent and HUGE move.
We’ll continue to hunt down opportunities and after today’s move we may have bought ourselves a bit more time for this market to push higher. Have a great week!
Regarding Berkshire, a couple points of note: 1. Buffet’s position in AAPL is relatively small, less than 1% of his holdings and 2. He doesn’t hold everything forever. Surprisingly, he all but eliminated his PG position last quarter, and completely eliminated his AT&T position, two very conservative holdings. My recollection is he’d had PG for a long, long time, but when he thinks there’s a reason, he does sell.
Jim, thanks for your comment. It is true he doesn’t hold EVERYTHING to eternity. He has stated many times his favorite holding period is forever. The point of bringing it up is Buffett has a much different timeline than many who read this FREE market commentary. AAPL was up on Monday solely because he took a stake. At the end of the day Buffett does something much different and blindly following him is not something we think is a wise move. Great investor, no doubt. Remember, without AIG getting 100 cents on the dollar Buffett and Berkshire would have gone under.
You made an interesting point about just ‘blindly’ following him that piqued my interest. If you take it one step further and assume ‘blindly’ means you just buy Berkshire itself, how’s it done over the past 10 years?
According to Google Finance, it turns out that Berkshire is up about 136% over that period (plus or minus), while the S&P is up about 54%. For a company so big that it’s long past its growth heyday, that’s not bad at all.
Actually, according to Bloomberg from 5/20/2005 to 5/13/2015 total return for BRK A is 165% while the S&P 500 is 27.9%. Had you just bought AAPL instead of either of the above you have a 1733% return.
We are not knocking on Buffett. We simply recommend folks not blindly following anyone. Be disciplined and think for yourself.