Boyar's Research Digest #43
May 19th, 2024
Happy Sunday to you all!
Interesting Fact:
It took the Dow ~874 trading days to close above 40,000 after its initial close above 30,000.
The stock market had a wild week starting with a meme stock revival sending shares of companies such as GameStop up over 180% at one point for the week (before closing the week up “only” ~27%).
On Wednesday the Consumer Price Index (CPI) came in slightly less than expected, the first positive sign in months that inflation might be relenting further. Markets reacted favorably as the Dow Jones Industrial Average closed Friday’s trading session past the 40,000 mark for the first time ever and has increased ~40% from its September 2022 low as some investors believe the likelihood of interest rates cuts this year have now increased (we think investors are reading way too much into one inflation report). As contrarians, the enthusiasm of market participants slightly concerns us (a widely followed investor survey showed 56.6% of respondents to be bullish and 17.7% bearish as of May 14).
On a stock specific level: after much anticipation Berkshire Hathaway, led by legendary investor Warren Buffett, revealed in a regulatory filing that they had been buying insurer Chubb. For the past two quarters they received exemptions from the SEC, allowing them to not publicly disclose their purchase (as Berkshire was still actively buying the stock and presumably was worried that the announcement of their involvement would drive Chubb’s share price higher). That fear would have been well founded as Chubb’s shares have advanced ~8% since Berkshire’s investment was announced. Chubb is a company that is familiar to Boyar Research as we initially profiled it in August of 2020 in our institutional research service at $125 per share.
Notable Reads, Watches, and Listens:
What It Takes To Be A Value Investor Today?
https://www.blog.boyarvaluegroup.com/boyar-value-group-blog/what-it-takes-to-be-a-value-investor-today
Jonathan Boyar was a guest on Yahoo Finance’s Opening Bid podcast hosted by Brian Sozzi. The conversation covered our investment process, how we uncover undervalued companies, as well as stocks we currently find to be attractively priced.
Chubb Is Surging After Berkshire Hathaway Reveals its Mystery Stock Purchase
https://www.barrons.com/articles/berkshire-hathaway-mystery-stock-warren-buffett-fe2ac440
Berkshire Hathaway’s mystery stock purchase has been revealed as Chubb, with Berkshire holding 25.9 million shares of the big property and casualty insurer at the end of the first quarter, based on a Wednesday filing after market close.
That stake in Chubb is now worth $6.6 billion, and Berkshire has about a 6% stake in the insurer.
Berkshire had requested confidential treatment from the Securities and Exchange Commission in the third and fourth quarter of last year for one or more of its equity holdings. The treatment was sought presumably because Berkshire CEO Warren Buffett wanted to accumulate Chubb without tipping off other investors and potentially boosting the price of Chubb shares.
Good article by Barron’s Andrew Bary discussing Berkshire’s Chubb purchase. He raises the interesting possibility that Berkshire could potentially purchase Chubb in its entirety.
Dow Jones Industrial Average Tops 40000 for the First Time
https://www.wsj.com/finance/stocks/dow-jones-industrial-average-tops-40000-for-the-first-time-52f316a1
The Dow Jones Industrial Average crossed 40000 for the first time, a milestone that appeared implausible a little more than two years ago when the Federal Reserve began raising interest rates to cool an overheated economy.
Gloom and doom forecasts abounded. When the central bank ended the era of ultralow rates that prevailed in the years following the global financial crisis, economists predicted painful consequences: a U.S. recession and rising unemployment.
Good article discussing what has propelled the bull market higher as well as highlighting potential risks to the stock market on the horizon.
A Legal Scholar Critiqued Elon Musk’s Pay. Now He’s Out of a Job.
https://www.wsj.com/business/autos/elon-musk-tesla-pay-vote-scholar-lost-job-0e3cb38b
The fight over Tesla CEO Elon Musk’s pay package has cost a well-known academic authority on corporate governance his consulting gig.
Last week, Charles Elson was preparing to file a legal brief criticizing a coming shareholder vote on a $46 billion pay package for Musk. That is when he got an email from the head of litigation at Holland & Knight, the law firm that has long handled Elson’s work as an expert witness.
It said that Tesla’s general counsel had called a partner at the firm and “advised that our relationship with Tesla is about to be terminated on account of actions you are taking,” the email, which was reviewed by The Wall Street Journal, said.
Best quote from the article:
“But if you have to choose between your job and your integrity, you choose your integrity every time.”
GameStop Soars in Meme Stock Flashback as ‘Roaring Kitty’ Reappears
https://www.ft.com/content/6aa63a0a-3bf2-46e9-a92c-ff269edea39d
Shares of video game retailer GameStop almost doubled in value on Monday after a single post by a social media account named “Roaring Kitty”, in a frenzy that recalled the “meme stock” craze at the start of the decade. Roaring Kitty is the account on social media platform X of Keith Gill, a day trader whose videos during the meme-stock bubble encouraged millions of others into the market, in turn propelling stocks such as GameStop to dizzying heights.
Here we go again! I had previously discussed the original meme stock madness with The Wall Street Journal’s Spencer Jakab, who wrote a fascinating book on the subject, on The World According to Boyar podcast.
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Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Clients of an affiliate of Boyar Research and employees of Boyar Research own shares in Berkshire Hathaway and Chubb.
Intresting