Friday File: Time for Cows, not Horses

By Travis Johnson, Stock Gumshoe, November 13, 2020


Narratives and emotion drive the market in the short term, so last week we saw the tech stocks and COVID winners take another surge higher, perhaps in some surge of “election finally done” relief or just from the indications of a likely split government ahead… this week, some combination of Joe Biden’s election victory being called over the weekend and the encouraging Pfizer vaccine news brought the COVID losers surging back.

Vaccine looks better? Quick, buy cruise lines and office buildings! Sell e-commerce!

Wait, COVID is surging again? Quick, buy Zoom Video!

Frankly, it’s exhausting… and a little bit silly. We should all probably try to look forward to the world that will likely exist in a year, still rebuilding the economy from the coronavirus shutdowns and still a little different than it was in 2019… but also probably back to something close to normal, with a vaccine or two providing some public confidence and leading to a reopening of office buildings and resumption of public gatherings, conferences, concerts and travel, with the growth trends that were in place in the previous decade still evident.

5G transition, electric cars and autonomous driving, video gaming and esports, more natural disasters, more alternative energy, population growth, continued transition to ecommerce in all sectors, and extremely low interest rates and continued government stimulus of some variety, accomplished partially through continued depreciation of the currency. These things are all still happening — some of the transition slowed or accelerated in the pandemic, but there’s no real indication that any of these trends are going away.

That doesn’t mean you have to invest in sexy trends, of course — the decisively non-sexy Berkshire Hathaway (BRK-B) had a solid jump this week, too, up 5% as they reported relatively weak operating earnings over the weekend but got some of that “industrial economy will come back” and “yay financial stocks!” surge on Monday, thanks in large part to Berkshire’s big buyback in the quarter ($9 billion, bringing the year-to-date share buybacks to $16 billion) and the recovery surge from Berkshire’s investment portfolio (which was responsible, led by largest holding Apple, for all of Berkshire’s earnings growth in the quarter, as their industrial, railroad, utility and other operations were weak thanks to the pandemic and the insurance business posted a rare underwriting loss).

Warren Buffett’s conglomerate has recovered much more slowly than the lustier stocks, for sure, ...

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