OptionPundit

Tag: AXP

  • Berkshire Hathaway’s worst year, Buffet Speaks, Likes Long Term

    Berkshire Hathaway (BRK.A) had its worst year on record, Chairman Warren Buffet told shareholders Saturday that the economy would remain in “shambles” during 2009 and beyond. His 22 page annual letter is full of wisdom nuggets. Also you may wanna read the annual report. Though I am capturing key points per my understanding, I shall encourage my readers to read the full letter as it offers valuable insights.

    Berkshire Hathaway profits dropped 96%. The per-share book value of both Class A and Class B shares of Berkshire fell 9.6%. For beginners, Berkshire Hathaway has produced a compounded annual gain in value of 362,319% since it’s founding in 1964, about 10 times what you would have gotten investing in the S&P 500, compounded at 20.3% per annum. This includes recent bad results.

    Let’s begin with some context of the economy-

    • “By the fourth quarter,” says Mr. Buffett, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.”
    • Government action was needed – ‘Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.
    • What’s needed – “Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects, Inflation is likely to be one such effect, Buffett said. “Moreover, major industries have become dependent on federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly. However, said Buffett, the U.S. government did need to take “strong and immediate action” to avoid a “total breakdown” of the economy.
    • (more…)

  • Outperformance Continues at OPNewsletter

    When compared with broader markets, Feb was an excellent month for OPNewsletter coupled with a few good learnings (kinda reinforcement, been there done that, but forget that). Overall, OPNewsletter for Feb closed up +5.6% x-commissions and +2.6% including commissions. Capital preservtion and thus allocation was higher priority vs missing an opportunity.

    These results doesn’t include the speculative directional trade which were shared here (only OPN subscribers can see this thread) and here at my profile on InvesCafe (Free) which includes likes of RIMM +40%, V +7.8%, BIDU +5.2%, BAC +10% to +40%, ESI + 33%, SRS, STT, WHR, BTU, AXP, CAT, ISRG, BLK and many more. I opened multiple positions where some won some lost (due to inability to fill on time as I was away and didn’t want to autotrade). Hardly any of those missed the expectations except the VXX which I intentionally closed.

    Above all, this doesn’t include future opportunities via capital preservation due to early warnings. Hope you have been reading OptionPundit and thus were aware of the Bear Market Signal that was reconfirmed recently. And of course, at least one assett class probably would have been shining in your diversified portfolio.

    I have already started investing for March’09 portfolios. if you would to sign-up, pls click here.

    Cheers and profitable trading, OP

  • Outperformance : OPNewsletter Feb’09 +5.85%(Open)

    An excellent month for OPNewsletter so far. Overall, OPNewsletter is up +8.87% x-commissions and +5.85% including commissions. We didn’t have to make any major adjustments to our portfolios except one which rolled partially to next month. We closed one portfolio for +17.17% gains and except any major disastrous events on Tuesday market open, remainder portfolios stands to gain good theta decay over the long weekend. This is what OPN wants, portfolios to be as boring as possible. We didn’t get fills on two income portfolios else results would have been even stronger.

    These results doesn’t include the speculative directional trade which were shared here (only OPN subscribers can see this thread) and here at my profile on InvesCafe (Free) which includes likes of RIMM +40%, V +7.8%, BIDU +5.2%, BAC +10% to +40%, ESI + 33%, SRS, STT, WHR, BTU, AXP, CAT, ISRG, BLK and many more. I opened multiple positions where some won some lost (due to inability to fill ontime as I was away and didn’t want to autotrade). Hardly any of those missed the expectations except the VXX which I intentionally closed.

    Other highlights includes my warning on Friday when markets were going higher in anticipation of stimulus package which proved right. Not that I have crystal ball, but it’s an experience I have been observing in the events of past few years.

    Overall an excellent month except that we didn’t invest a lot of capital for income spreads (only a max of 26.5%), but as I mentioned earlier, capital preservation is higher importance than missing a potential opportunity, especially in markets like current ones. We may always make more money if we have trading capital preserved. Once trading capital is lost, we can’t benefit from any opportunity even if it is as sure as that sunrise.

    I shall be looking for March’09 portfolios. if you would to sign-up, pls click here.

    Cheers and profitable trading, OP

  • Futures are Pointing Higer Opening

    There are a lot of positive news in the market, for a change. Some of the companies have announced good results. FDIC starting a “bad bank” concept and FOMC meeting announcement at 2:15pm. There is nothing much fed is left with from the interest rates perspective, but Uncle Ben may have some more tricks.

    Y’day volume was thin, and internals were ok. I would consider action so far as bouncing from the oversold region. But I am ready for any “new development” as well. The markets need to clear upper edge of the minor resistance which appears to have formed over the last few days. For the DJIA, the upper edge of the resistance is near 8250, while the equivalent level is near 855 for the S&P 500 and 1515 for the NASDAQ. A move above these levels may be viewed as a breakout but volume is the key. So watch out for the volumes together with any move to avoid any bull traps.

    So far we have hatrick on earnings (2 shared as bonus trades in speculative section, 1 shared as Income portfolio) for OPNewsletter (AXP, BTU and GD). So far so good, we have invested nearly 20% of capital and have cash available for more opportunities.

    Trade carefully and as much possible, delay decision of going long at least by one day.

    Cheers and profitable Trading, OP

  • American Express Beats on Earnings (AXP)

    American Express, AXP posted third quarter earnings of $0.74 per share, which is $0.15 better than consensus estimate of $0.59 per share. The company’s revenue totaled $7.16 billion vs. analysts’s estimates of $7.31 billion in revenue. Consolidated provisions for losses totaled $1.4 billion, up 51% from a year ago. The third quarter net loan write-off rate in the U.S. Card Services segment was 5.9%, up from 5.3% in the second quarter.

    The company believes consumer and business sentiment is likely to deteriorate further, translating into weaker economies around the globe well into 2009. Cardmember spending is likely to remain soft. Loan growth will be restrained partly because of company efforts to reduce credit risks.

    The shares were up in the after market hours trading. This was also a bullish pick for OPNewsletter. We’ll see how it performs when market opens. Albeit, Moody’s Investors Service lowered the long-term senior ratings of American Express Co. (Amex) to ‘A2’ from ‘A1’, citing negative asset quality trends and lending exposures, particularly within geographic markets in the United States that have experienced sharp home price declines. According to the report, about $75 billion of debt securities are affected by the action. The rating outlook is negative.

    On the other hand Texas instruments (TXN) missed on both revenue as well as earning’s estimates. To make matter worse, TXN has also lowered the guidance. The week is packed with action, we have lot of companies announcing results including Caterpillar (CAT), Coach (COH), Manpower (MAN), Pfizer (PFE) and US Bankcorp (USB) to name a few that are going to set the tone for market action today.

    Profitable trading, OP