Let's start with a few words on the stock markets as a whole. The first quarter saw gains of11% for the S&P500 and 8% for the FTSE 100. Vaccination, the US stimulus plan and the economic recovery marked the period. Corporate results for the first quarter are currently providing the fuel for the rise. They are beating forecasts by a larger margin than usual, according to FactSet's work. In the background, it is still the central banks that are irrigating the system by continuously injecting funds into the matrix.
This year, the annual general meeting of Warren Buffet’s holding company, Berkshire Hathaway, was held on Saturday via interposed screens, due to the coronavirus. Buffett and his old friend Charlie Munger, 97, were for the first time accompanied by Greg Abel and Ajit Jain, possible successors of the tireless duo.
This general meeting is a big deal, since Berkshire Hathaway is a sort of investment fund for its shareholders and also because Buffett has an aura as a successful investor. So it's interesting to hear what he has to say about the big issues dominating the financial markets right now, even if 2019 and 2020 were not very good vintages for Berkshire, which significantly underperformed the S&P500.
First, bitcoin. Buffett shrugged it off when asked what he thinks of it, leaving it to Munger to explain that he is dead set against a currency useful to "kidnappers and extortionists and contrary to the interests of civilization.
On the other hand, Warren Buffett led a long indictment of apps that turn investing into casino games. There is nothing illegal to it, there's nothing immoral, but I don't think you build a society around people doing it,” he said.
Both men have the same reservations about SPACs, the empty shells that allow one or more companies to go public by simplifying the listing process. Buffett has no intention of giving in to the temptation. "It won't last forever, but that's where the money is now," he concluded.
Common sense or resistance to change? Time will tell. I should add that Berkshire shareholders rejected resolutions that would have forced the company to publish environmental and social data on the impact of its holdings. Warren Buffett evaded the issue, arguing that the group is decentralized and that each of its portfolio companies already meets its transparency obligations.
On the other hand, Berkshire's management does not seem to have a compelling enough idea to launch acquisitions. Share buybacks should therefore continue.
Finally, Buffett notes that inflation is here and that it is important. Berkshire companies are raising their prices and are seeing price increases themselves. He believes it's not going to stop because "people have money to spend."
Today's economic highlights
March retail sales in Germany are published today, along with the final manufacturing PMI indices for the major economies in April, including France, the Eurozone and the US, where the ISM manufacturing and construction spending for March will also be released. The Fed boss, Jerome Powell, will also deliver a public speech.
The dollar is down to EUR 0.8298, while the ounce of gold is back in the USD 1780 area. Brent crude at USD 66.80 and WTI at USD 63.8. The yield on US debt is relatively stable at 1.63% over 10 years. In the cryptocurrency market, bitcoin breaks through the symbolic USD 58,000 mark and ethereum through USD 3,000.
* Tesla has come under scrutiny in China over safety and customer service complaints, and is making a strategic shift by beefing up its communications team with Beijing in a bid to pacify their relationship, sources told Reuters. Meanwhile, German weekly Automobilwoche reported that the company is delaying the start of production at its Gigafactory near Berlin for another six months.
* The Estee Lauder companies reported lower-than-expected quarterly sales on Monday, hurt by lower demand.
* Moderna is up 2.3% in premarket trading after announcing Monday that it will supply 34 million doses of its COVID-19 vaccine to the international COVAX program this year.
* Berkshire Hathaway on Saturday reported quarterly operating profit up 20% to $7.02 billion and announced a new $6.6 billion share buyback program. The group's historic leader, Warren Buffett, assured that Berkshire was benefiting from the economic recovery in the United States but explained that the vogue for SPACs was complicating the allocation of its cash, which amounts to 145.4 billion dollars.
* Intel announced Sunday that it will invest an additional $600 million in Israel to expand research and development, including in autonomous vehicles.
* Dell Technologies announced Sunday that it has reached a definitive agreement with private equity groups Francisco Partners and TPG Capital to sell its Boomi cloud computing business for $4 billion (€3.32 billion) in cash.
Today’s analyst recommendations:
Aker BP: Jefferies remains Hold with a reduced target of NOK 271 to 252.
AstraZeneca: Credit Suisse rates the stock a Buy: Target price stays at GBX 9000.
Barclays: Goldman Sachs stays on Buy, lowers target price to GBX 245, compared to GBX 250.
The Clorox Company : cut to Underweight at Wells Fargo; price target set to $170, down 6.8% decrease from last price.
Commerzbank: Barclays keeps its Sell rating and its target price at EUR 5.00.
Delivery Hero: Jefferies remains Buy with target raised from EUR 128 to EUR 155.
Deutsche Lufthansa: Credit Suisse remains Underperform with a target cut from EUR 4.60 to EUR 4.47.
DSV: Jefferies remains Buy with a price target raised from DKK 1,300 to 1,600.
Kuehne + Nagel: Jefferies remains a Hold with a price target raised from CHF 215 to 250.
Laboratory Corporation of America: Citigroup raises price target to $312 From $278, keeps Buy rating
Snowflake: Needham rates Snowflake at Hold, price target is up 0.24 % to USD 232.14