BArrons: Warren Buffett Talks Buybacks, Succession, Bitcoin, and 5G at the Berks

The Berkshire Hathaway annual shareholders meeting is in full swing in Omaha, Neb., with the weekend’s main event under way: CEO and chairman Warren Buffett and vice chairman Charlie Munger spent the morning responding to questions on topics from buybacks to Bitcoin to the operations of Berkshire’s (ticker: BRK.A) many businesses. Here are a few of the highlights from the first half of Saturday’s meeting.

Buybacks
Several of the morning’s questions were on the topic of Berkshire’s relatively small share repurchases in recent quarters despite the company’s cash hoard of over $110 billion. Buybacks totaled $1.6 billion in the first quarter after $1.3 billion in the second half of 2018. Buffett commented that the decision to buy back shares would depend only on whether it’s the right decision to make for shareholders, not based on the amount of cash on Berkshire’s balance sheet.

“Whether we have $100 billion or $200 billion or $50 billion, it would not make a difference in our approach to repurchasing shares,” he said. “...We will repurchase stock when it falls below a conservative estimate of its intrinsic value. We want to be sure that when we repurchase shares that the remaining shareholders are worth more the moment after we repurchased the shares than they were before.”

Yet Buffett seemed to hint at more share repurchases in the future, saying that the recent pace of buybacks was short of his ambitions. Munger also predicted, “We will get more liberal in repurchasing shares.”
Buffett said that the bulk of buybacks going forward would be in the company’s class B shares, which have higher trading volume than its A shares.

CEO Succession
Buffett, who turns 89 this summer, is one of the most recognizable CEOs in the world, but he can’t be at the helm of Berkshire Hathaway forever. Munger, at 95, is even older. A question about having vice chairmen Greg Abel and Ajit Jain on stage answering questions at future meetings drew applause from the audience. Both have been suggested as possible Buffett successors.
“That’s probably a pretty good idea,” said Buffett “...This format is not set in stone at all. You’re probably tired of looking at Charlie and me; those guys are better-looking than we are.”

Jain did stand up to did to answer a question on Berkshire Hathaway’s insurance underwriting standards later in the meeting.
Responding to a separate question, Buffett mentioned that his advanced age may be both a drawback and an advantage.
“It’s absolutely true by any yardstick you use I’m going downhill,” he said. “And if I would take the SAT test now and you could compare it to a score of what I was in my early 20s, I think it would be embarrassing. But I do think I know more about human behavior than I did when I was 25 or 30.”

Kraft Heinz
Berkshire Hathaway owns 27% of Kraft Heinz (KHC), but because the company has yet to file its first-quarter earnings, its results aren’t reflected in Berkshire’s earnings this quarter. Last quarter, Kraft Heinz took a major loss on a write-down of its intangible assets.


Buffett repeated his admission that he overpaid for Kraft in 2015 and noted that the consumer brands landscape was changing due to increased bargaining power from retailers like Costco Wholesale (COST), Walmart(WMT), and Amazon.com (AMZN). Still, Buffett said he believes in Kraft Heinz’s business.
“Kraft Heinz is still doing very well operationally,” Buffett told shareholders. “…[But] you can turn any investment into a bad deal by paying too much.”
Later in the morning, Buffett said he could envision partnering with investment firm 3G Capital on more deals in the future as well. Buffett and private-equity firm 3G partnered to merge Kraft with Heinz in 2015.

5G Technology
Buffett and Munger put their hands-off management style on display when responding to a question about the impact of next-generation 5G wireless networks on some of their businesses.

“We have people in those businesses who know a lot more about them then we do, and we count on our managers to know what’s coming in their businesses,” said Buffett.
He broadened his answer to refer to all types of technology disruption, saying that he trusted managers to be experts in their fields and respond.
“I know very little about 5G,” said Munger.

Bitcoin
Buffett has commented more extensively on cryptocurrencies at previous shareholder meetings, but on Saturday he told a story about an observation he made on his honeymoon in Las Vegas in 1952. He compared investors in Bitcoin to wealthy people who traveled hundreds of miles to lose their money playing roulette and other games.

“I looked around and saw all of these well-dressed people,” Buffet said. “...They came to do something that every damn one of them knew was mathematically dumb.”

BArrons: Biogen Stock Is Near a Multiyear Low. The CEO and a Hedge Fund Bought M

Biogen Stock Is Near a Multiyear Low. The CEO and a Hedge Fund Bought Millions.

Biogen stock remains near a multiyear low after a shellacking two months ago, but a hedge fund and the company’s CEO just made some big stock purchases.

Biotgen stock (ticker: BIIB) lost more than a quarter of its value on March 21 after the biotech company announced the end of trials for an Alzheimer’s disease treatment. Last week, one analyst wrote in a report that “owning Biogen shares at these levels makes a lot of sense.” As that assessment was circulating, big buyers were already making their moves.

Sarissa Capital Management paid $27.2 million for 118,342 Biogen shares, an average per-share price of $229.94, from April 30 through May 2. Sarissa now owns 643,000 Biogen shares, according to a form it filed with the Securities and Exchange Commission. Alexander Denner, a founding partner and chief investment officer of Sarissa, is a Biogen director who owns 10,909 shares in a personal account.

Biogen CEO Michel Vounatsos paid $1 million on May 1 for 4,351 shares. He now owns 21,007 Biogen shares in a personal account. This is his first open-market purchase of Biogen stock since paying $250,030 on Dec. 29, 2017 for 780 shares, an average price of $320.55 each.

Biogen didn’t make Vounatsos available for comment on the purchase, and the company also declined to comment. Sarissa didn’t respond to a request for comment on its stock purchase.

Sarissa and Vounatsos bought Biogen stock near a multiyear low of $216.12 that was set on March 25. Shares haven’t traded at that level since September 2013. Through Friday’s close at $231.18 per share, Biogen stock is down 23.2% for 2019.

>>> Tyson Foods beats by $0.05, beats on revs; reaffirms FY19 EPS, revs guidance

Tyson Foods beats by $0.05, beats on revs; reaffirms FY19 EPS, revs guidance (75.09)
  • Reports Q2 (Mar) earnings of $1.20 per share, excluding non-recurring items, $0.05 better than the S&P Capital IQ Consensus of $1.15; revenues rose 6.9% year/year to $10.44 bln vs the $10.25 bln S&P Capital IQ Consensus.
  • "Looking ahead, African Swine Fever has the potential to impact the global protein industry on a level that we have never experienced, and it is an event that will underscore the power of the Tyson business model. While Tyson's diversity across segments provides stability and puts us in a position to capitalize when opportunities arise, all proteins could see a benefit. A worldwide decrease in pork supply would offer significant upside to our pork business, while also lifting the chicken and beef businesses as substitutes and increasing raw material costs in our prepared foods business...Our forecasts for the current fiscal year do not include any potential effects from ASF as we do not have clarity on when the impact might occur or what the magnitude could be. To date, pork pricing hasn't kept pace with increased hog costs, leading us to believe any positive ASF impact would occur in late fiscal 2019 into fiscal 2020 and beyond."
  • Co reaffirms guidance for FY19, sees EPS of $5.75-6.10, excluding non-recurring items, vs. $5.95 S&P Capital IQ Consensus; sees FY19 revs of ~$43 bln vs. $42.46 bln S&P Capital IQ Consensus

>>> US Early premarket gappers

Early premarket gappers

Gapping up:

  • ESPR +15.6%, SAEX +10.7%, MUX +4.3%, AUY +3.9%, APC +2.4%, HMY +1.3%, GOLD +1%, THC +0.9%, GDX +0.6%, MTSI +0.5%

Gapping down:

  • BZUN -8%, CSIQ -7.7%, JKS -7.1%, VIPS -7.1%, MOMO -6.4%, TAL -6.1%, SWKS -5.9%, MT -5.8%, WB -5.5%, YY -5.5%, JD -5.4%, HTHT -5.1%, SINA -4.6%, BABA -4.5%, STM -4.5%, CTRP -4.5%, AMD -4.3%, NVDA -4.2%, MU -4.2%, SQ -4.1%, EDU -4%, BIDU -4%, WDC -4%, FCX -3.8%, NWL -3.8%, CMCM -3.7%, WYNN -3.6%, W -3.6%, AMAT -3.5%, CS -3.5%, MRVL -3.4%, X -3.4%, ASML -3.1%, AAPL -3.1%, OSTK -3%, CAT -3%, QCOM -2.9%, TXN -2.8%, BA -2.8%, SHOP -2.8%, F -2.8%, FSLR -2.8%, TWTR -2.8%, MGM -2.6%, FB -2.6%, ATVI -2.5%, PYPL -2.5%, V -2.4%, AMZN -2.3%, MA -2.2%, ADBE -2.1%, BMY -1.3%, FTNT -1.1%

>>> Ferretti does not rule out partner (translated) 06 MAY 2019 Ferretti, the It

Ferretti does not rule out partner

Ferretti, the Italian yacht maker, is considering different strategic options for its future, according to the Italian newspaper L’Economia de Il Corriere della Sera. The report cited Alberto Galassi, Ferretti’s chief executive, who said that the company is ready for its listing but Weichai Power, the Chinese state-backed automotive and equipment manufacturer which is Ferretti’s main shareholder, could also opt for a new partner. Weichai has already informally selected Barclays, UBS and BNP Paribas for its IPO, added the item.
Galassi also noted that the company also aims to make acquisitions in complementary sectors.
Ferretti posted EUR 669m revenues and an EBITDA of EUR 53m in 2018.

WSJ : Making Monkeys Out of the Sohn Investing Gurus Randomly selected stocks be

Making Monkeys Out of the Sohn Investing Gurus
Randomly selected stocks beat the picks made by last year’s Sohn Conference headliners


No animals were harmed in this financial experiment, but some human egos were bruised.

Burton Malkiel famously wrote in “A Random Walk Down Wall Street” that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.” A year ago the journalists at Heard on the Street decided to see if they could beat the crème de la crème—fund managers presenting their stock picks at the annual Sohn Conference in New York.

The results were brutal. Heard columnists, not monkeys, threw the darts at newspaper stock listings, but Mr. Malkiel would still approve. The columnists’ eight long and two short picks beat the pros’ selections by a stinging 27 percentage points in the year through April 22. Only 3 of 12 of the Sohn picks even outperformed the S&P 500.


Glen Kacher of Light Street Capital had the best pick among Sohn speakers with Palo Alto Networks . PANW 1.64% Li Ran of Half Sky Capital had the single worst one with Grubhub , but Jeffrey Gundlach of DoubleLine whiffed more in absolute terms. He recommended a pair trade—selling Facebook short while buying a fund of oil producers. They rose and fell, respectively.

The best of the dart-derived picks was a long on payroll processor Paychex , while the worst was Barrett Business Services , but we chalk our rare miss up to sweaty palms.

Masters of the universe and their fans might consider it unfair being measured by the raw performance of a handful of stocks for just one year. They have a point, but unfair to whom?

These days, even those in the right tax bracket to gain entry into a hedge fund run by the likes of David Einhorn might choose a low-cost index fund instead. The darts contest didn’t consider the hefty management and performance fees such stars command, but Warren Buffett did in a 10-year contest ending in 2017 that suggested even more strongly that active management is for chumps. Fund manager Ted Seides “invested” a notional sum in five hedge funds of his choice while Mr. Buffett chose an S&P 500 index fund. The Oracle of Omaha prevailed in nine years out of 10, racking up a return of 126% compared to just 36% for the funds after fees.

The good news for investors looking for a leg up is that there is no reason to pay $5,000 for a seat at Monday’s Sohn Conference—though of course the money goes to a good, charitable cause. The even better news is that Heard’s columnists will be throwing darts again this week and publishing the results for the $4.00 cover price of the newspaper—just 40 cents per pick. You even get the rest of the newspaper free.

WSJ : Boeing Knew About Safety-Alert Problem for a Year Before Telling FAA, Airl

Boeing Knew About Safety-Alert Problem for a Year Before Telling FAA, Airlines
The problem kept a safety feature found on earlier models from functioning on the 737 MAX

Boeing Co. BA 0.18% didn’t share information about a problem with a cockpit safety alert for about a year before the issue drew attention with the October crash of a 737 MAX jet in Indonesia, and then gave some airlines and pilots partial and inconsistent explanations, according to industry and government officials.

It was only after a second MAX accident in Ethiopia nearly five months later, these officials said, that Boeing became more forthcoming with airlines about the problem. And the company didn’t publicly disclose the software error behind the problem for another six weeks, in the interim leaving the flying public and, according to a Federal Aviation Administration spokesman, the agency’s acting chief unaware.

The length of time between when Boeing realized the problem and when it shared that information hasn’t been previously reported. The problem kept a safety feature found on earlier models from functioning on the MAX, though it isn’t clear if the feature would have prevented either crash.

Senior FAA and airline officials increasingly are raising questions about how transparent the Chicago aerospace giant has been regarding problems with the cockpit warnings, according to people familiar with their thinking.

The growing scrutiny could pose new challenges to Boeing’s efforts to shore up confidence in the 737 MAX, solicit regulatory support around the globe and get the MAX fleet, grounded after the second crash, flying again.

Meanwhile, as part of a criminal probe into whether Boeing misled regulators or customers, investigators as recently as last week were asking questions about how the MAX jets gained approval for flight and about Boeing officials involved in the process.

On Sunday, Boeing said company engineers in 2017 identified that the alerts weren’t operating as intended due to a software error. Boeing said that at the time it relied on standard internal procedures and conducted an internal review by engineers and managers that determined that the problem didn’t “adversely impact airplane safety or operation.” Senior Boeing leaders didn’t learn about the issue until after the Oct. 29, 2018, Lion Air crash, the company said.

The conclusions were shared with midlevel FAA officials after the Lion Air crash, according to Boeing and the FAA. An FAA spokesman said midlevel agency officials analyzed the issue of the inoperable alerts from November 2018 to February, and concluded emergency action wasn’t required.

Boeing, according to industry and government officials, told different airlines months apart from one another that the cockpit alerts—intended to warn pilots about certain sensor malfunctions—didn’t work on most of the global MAX fleet as originally designed, due to a software error. The same feature—called angle-of-attack disagree alerts—is to be made standard on all 737 MAX jets as part of an impending software fix aimed at getting the grounded fleet back in the air. The alerts warn pilots if sensors measuring the angle of a plane’s nose are sending errant data.

Such alerts offer an extra safeguard for pilots in the event a separate stall-prevention system called MCAS misfires, a situation that led to the Lion Air crash and the March crash of an Ethiopian Airlines jet. The crashes took a total of 346 lives. It isn’t clear whether functioning alerts, supplemental to the MCAS system, would have made a difference in either accident.

At the company’s annual shareholder meeting on April 29, Chief Executive Dennis Muilenburg said the company was focused on safety and that the plane maker would look for ways to improve how it develops airplanes.

Mr. Muilenburg said later that the alerts “will be standard on all the 737 MAXs,” hours before the plane maker disclosed it had actually intended the safety features to be standard.

Boeing said it realized the alerts weren’t operating several months after the first deliveries of the model, which was certified to carry passengers in March 2017.

On Friday, a spokeswoman for Southwest Airlines Co. , the largest MAX customer, said Boeing told the carrier about the inoperative alerts after the Lion Air crash. Southwest learned about the problem with the alerts by late November, and began installing additional cockpit indicators late last year.

Over the weekend, a spokesman for United Continental Holdings Inc., another major MAX operator, said Boeing first told the airline about the software error toward the end of March, four months later than Southwest, in the wake of the Ethiopia crash, which took 157 lives. United had believed the alerts were part of an optional package it declined, before eventually learning its MAX aircraft actually had the feature but it wasn’t working, the carrier’s spokesman said.

WestJet, a Canadian carrier, has said it wanted its 13 MAXs to have the warning for when the two angle-of-attack sensors disagree, just as its older 737s do. A spokesperson for the carrier said Saturday the airline learned about an issue with the alerts “earlier this year with further clarifications in the months after.”

A House Transportation Committee investigation, among other things, is looking into why the FAA and Boeing didn’t publicly disseminate information about the nonfunctioning sensors, according to people familiar with the matter.

Meanwhile, questioning continues in the federal criminal investigation into the suspect MCAS system, and how the jetliner was certified.

As recently as last week, two prosecutors and federal special agents from the Federal Bureau of Investigation and Department of Transportation inspector general’s office interviewed a former Boeing employee and asked broad questions about the manner in which the suspect flight-control system was developed, according to a person familiar with the meeting.

During the interview, which was conducted near Boeing’s facilities in Everett, Wash., the prosecutors and agents asked questions about how the system underwent official technical reviews covering potential hazards, this person said. Prosecutors and agents asked about specific Boeing executives and pilots involved in the MAX program, this person said, adding that investigators appeared to have already gathered at least one internal Boeing email.

An FAA spokesman said the agency was set to issue a world-wide special safety information bulletin when the Ethiopian crash intervened and the planes were grounded. Boeing’s statement confirmed that it worked with the FAA to develop a plan to resolve the alert problem as part of a broader software fix.

The FAA also said that Daniel Elwell, the agency’s acting chief, didn’t learn about the inoperative alerts until The Wall Street Journal published an article on the topic April 28. The agency is reviewing its procedures for sharing information among various levels of management, as well as about safety evaluations of new models, the spokesman said.

Some senior FAA officials expressed concern that Boeing didn’t directly make them aware of the problem sooner, according to a person familiar with the matter.

Boeing didn’t publicly disclose that the alerts didn’t work until the next day, when it released a statement indicating “the feature was not activated as intended.”

For its part, the FAA said that “timely or earlier communication with the operators would have helped to reduce or eliminate possible confusion.”

FT : Brazil’s Bolsonaro keeps it in the family The president trusts few people a

Brazil’s Bolsonaro keeps it in the family
The president trusts few people and so with his sons is building a dynasty in Latin America’s largest nation

One is known as the “pit bull”. Another is embroiled in a corruption scandal. The third is a rightwing gun enthusiast who is seeking to spread a populist movement throughout Brazil and Latin America.

More than four months into the administration of President Jair Bolsonaro, his three sons have emerged as a powerful force that is reshaping Brazilian politics.

This has fuelled fears that they exert undue political influence and are consolidating a new political dynasty in a continent with a long and contentious history of family politics.

“The sons have unprecedented influence,” said Aline Souza, an analyst with consultancy Prospectiva. “The Bolsonaro government has already broken with traditional modes of governance. One example of this is precisely this relationship with the children.”

“The perfect word is dynasty,” added Esther Solano, a professor of politics at the Federal University of São Paulo.

“The situation we have is that we voted for a president, but in fact his children have governmental powers. We have a family clan in the government.”

One reason the issue is controversial is because Flávio, Carlos and Eduardo — the three Bolsonaro sons in descending age order — have been so outspoken since the inauguration of their father in January. 

In the US, Ivanka Trump and Jared Kushner, the president’s daughter and son-in-law, maintain a low-profile in comparison to the Bolsonaro sons, who have stormed on to Brazil’s political stage with a combination of social media invective and a visible presence in policymaking.

“They have the last word on everything. That is just a matter of fact. The president trusts no one else,” said William Waack, a political commentator. “This is not gossip. Bolsonaro himself talks publicly about how important his sons are.”

The men wield power in myriad ways, from publicly setting out policy priorities to speaking on behalf of their father, said Malu Gatto, a Brazilian assistant professor at UCL.

“They are seen as representatives of their father by many in government,” she added. 

Raised on a military base, the sons were using firearms from the age of five, according to their father, a former army captain who was elected president in a landslide victory in October. Since then, the men have moved into politics, taking with them a shoot first and ask questions later mentality. 

Front and centre in recent weeks has been Carlos Bolsonaro, a 36-year-old whose fierce loyalty to his father earned him the “pit bull” moniker. Officially a city councillor in Rio de Janeiro, Carlos co-ordinated his father’s social media campaign during the election and is widely credited with helping the once outsider candidate dramatically expand his voter base.

He has since emerged as a de facto spokesman for the Brazilian president, utilising social media to hound potential adversaries, including most recently vice-president Hamilton Mourão.

In a tweet last week, Carlos, slammed Bill de Blasio, the mayor of New York, after the Brazilian president decided not to visit the city. The decision followed a public outcry from environmentalists, gay activists and Mr de Blasio himself over the Brazilian-American Chamber of Commerce’s move to honour Mr Bolsonaro at a gala.

“Jair Bolsonaro needs to stop anyone occupying the centre ground. He can only maintain power if there are no centrists to challenge him. That is what Carlos is doing. He shapes the debate,” said Eduardo Mello, a professor at the Getúlio Vargas Foundation.

Carlos’ domestic role is complemented on the international front by his younger brother Eduardo. 

A federal deputy and chair of the house foreign affairs committee, Eduardo has adopted the role of de facto foreign minister, travelling to the US, Hungary and Italy in recent months to build relations with like-minded rightwing populists.

His office in Brasília is adorned with framed rifle rounds, bobblehead figurines of Ronald Reagan and Donald Trump and a sports cap that reads “Trump 2020”. 

In February he pledged to “reclaim sovereignty from progressive globalist elitist forces” when he was named Latin America leader of The Movement, the populist group being spearheaded by US ideologue Steve Bannon. 

He also won high praise from Donald Trump for orchestrating a meeting between the Brazilian and US presidents in March.

“Eduardo Bolsonaro has this very strong foreign policy agenda. The visit to the White House was very symbolic. He was the one alongside his father then, not the actual foreign minister,” said Ms Souza.

Flávio, the eldest son, has opted for a lower profile. Since the inauguration of his father, the Rio de Janeiro senator has been embroiled in a lingering corruption scandal involving suspect payments that has at times overshadowed the presidency of Jair.

“There is an ongoing fight within the administration [in Brasília]. There are the people who want to work within the system and then there are the people who want to overthrow the system. My understanding is the sons are the main leaders behind this second faction,” said Prof Mello.

“Bolsonaro doesn’t trust many people, so he has surrounded himself with family.” 

According to a presidential adviser, who spoke on condition of anonymity, “the children are not going to wean from their father” and the father “is not going to go public to defend those people who are being attacked by his sons”.

“There are as many rational interests as irrational emotions present here,” the adviser said.

The sons did not respond to requests for comment.

Many believe the Bolsonaros have consolidated their position on Latin America’s list of political dynasties, which includes the leftwing Kirchners in Argentina and the rightwing Fujimoris in Peru. 

Vice-president Mourão points out that while Brazilian politics has long featured influential family clans, none have been spread across the highest echelons of power like the Bolsonaros.

“We have had family clans . . . But it was a thing limited to state [level] policy and also some positions in the federal government. We never had a case such as this,” he told the Financial Times recently.

Given the sons cannot be fired, analysts predict that their influence will continue to grow until the intervention of another faction within the government, such as the military.

“In general, the results of these dynasties are never good for the countries,” said Maurício Santoro, professor of international relations at Rio de Janeiro’s Federal University.

FT : Big pharma/cancer: the allure of a cure

Big pharma/cancer: the allure of a cure
Commercial rewards will be elusive in a crowded market

Nearly 50 years ago, Richard Nixon declared “war on cancer”. Hopes of a quick victory were shortlived. Yet scientific understanding has deepened. The number of recent new cancer drug approvals is “staggering”, says the US regulator’s new acting head. That is good news for patients. Investors should brace for trouble ahead.

Drugs companies are investing heavily, for reasons that are not hard to fathom. There is a lot of unmet need. Prices are high. However cash-strapped the health system, insurers have to pay for whatever oncologists prescribe in most US states.

The annual cost of treatment with a new cancer drug in 2017 averaged more than $150,000, nearly twice the price in 2013, says research group Iqvia. Revenues can be as much as 10 times higher than research costs.

The market is accordingly crowded and competitive. More than 700 cancer drugs are in late-stage development — up more than 60 per cent from a decade ago. The proportion in the late-stage pipeline of the 14 biggest pharma companies has more than doubled since 2010 to nearly 40 per cent, says Deloitte. Given that cancer drugs now generate just a tenth of industry sales, pharma groups may see poor returns on their research and development, says UBS. It detects signs of a R&D bubble.

Such concerns fuelled recent debates over the value of Celgene’s pipeline. The US biotech group has some of the sector’s highest cancer drug revenues, says Evaluate. But it faces expiring patents. Starboard, the activist that campaigned against its purchase by Bristol-Myers Squibb, raised doubts over the blockbuster potential of some of its hotly tipped new drugs.

Survival rates have improved dramatically since President Nixon’s time. Some cancer drugs have superstar status. Former president Jimmy Carter was saved from dying from skin cancer in 2015 after being treated with Merck’s immune response booster Keytruda. Its sales are tipped to hit $16bn a year by the mid-2020s.

Such forecasts underline the sector’s potential. But investment has outpaced the market. For many, commercial rewards will be elusive.