Category: Global stocks

Global Stock refer to share that are traded on multiple exchanges with different currencies. For example, if a publicly-traded company issues shares in dollars on the New York Stock Exchange and in pounds on the London Stock Exchange, it is issuing global registered shares. Global stock to a portfolio offers diversification and may provide higher returns. Global stock markets may experience higher levels of volatility than other domestic markets with bigger swings to both the upside and downside.

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Global stocks Shares

Raising Tesla’s FVE to $600 on Improved Long-Term Outlook for AV Software

the company went from a startup to a globally recognized luxury automaker with its Model S and Model X vehicles. In addition to luxury autos, the company also competes in the mid-size car and crossover SUV market with its platform that is used for Model 3 and Model Y vehicles. Tesla’s strategy is to maintain its market leader status as EVs grow from a niche auto market to reaching mass consumer adoption. Tesla also invests around 6% of its sales into R&D, focusing on improving its market-leading technology and reducing its manufacturing costs. The company will also move upstream into battery production, with a goal to reduce costs by over 50%. 

Tesla’s extended range EVs are already at range parity with ICE vehicles, which should improve further with plans for its batteries to improve energy density. Tesla also continues to increase its supercharging network, which consists of fast chargers built along highways and in cities throughout the U.S., EU, and China. Tesla also sells solar panels and batteries used for energy storage to consumers and utilities. As the solar generation and battery storage market expands, Tesla is well positioned to grow in this market. 

Financial Strength 

Tesla is in solid financial health as cash and cash equivalents exceeded total debt as of June 30, 2021. Total debt was roughly $9.4 billion, however, total debt excluding vehicle and energy product financing (non-recourse debt) was around $4 billion. Cash and cash equivalents stood at $16.2 billion as of June 30, 2021.To fund its growth plans, Tesla has used credit lines, convertible debt financing as well as equity offerings and credit lines to raise capital. In 2020, the company raised $12.3 billion in three equity issuances. 

We are raising our fair value estimate to $600 per share from $570 for narrow-moat Tesla following AI day. Our largest key takeaway from Tesla’s AI day was the progress that the company is making on its Level 3 autonomous vehicle software known as full self driving. The biggest change to our forecast is our long-term outlook for Tesla’s Level 3 autonomous vehicle software. The software, which is currently still in beta testing mode, appears to be closer to a rollout than we had expected. 

Dojo is the supercomputer that Tesla is using to train its AV software. However, over the next several years, the company plans to begin selling AI training to other companies using extra processing space. This should generate operating profits in line with software companies. Finally, Tesla plans to develop humanoid robots that can be used to perform dangerous or repetitive tasks, by creating a repurposed version of the same camera-based autonomous software that it is developing for cars in the humanoid robots, which will be programmed to perform simple tasks.

Bulls Say’s 

  • Tesla has the potential to disrupt the automotive and power generation industries with its technology for EVs, AVs, batteries, and solar generation systems.
  • Tesla will see higher profit margins as the company achieves its plan to reduce battery costs by 56% over the next several years.
  • Through the combination of its industry-leading technology and unique Supercharger network, Tesla offers the best function of any EV on the market, which will result in the company maintaining its market leader status as EV adoption increases.

Company Profile 

Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. The company sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. Tesla has multiple vehicles in its fleet, which include luxury and mid-size sedans and crossover SUVs. The company also plans to begin selling more affordable sedans and small SUVs, a light-truck, semi-truck, and a sports car. Global deliveries in 2020 were roughly 500,000 units.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Estee Lauder’s Currency Sales Grew to $16.2 Billion

missing $16.5 billion estimate, as an increasing number of COVID-19 cases resulted in another round of store closures across Europe, Latin America, and Asia (excluding China). Even so, fiscal 2021 sales are 6% above fiscal 2019 revenue (adjusted for acquisitions), supported by Estee’s ability to pivot to ecommerce, which increased to 28% of fiscal 2021 sales, compared with 15% in 2019.

 The travel retail channel has remained surprisingly resilient, which increased to 29% of fiscal 2021 sales, versus 23% in 2019. While international travel is largely curtailed, domestic trips have been strong, particularly in China’s Hainan province. 

Other factors that helped the firm return to prepandemic sales levels despite continued store closures are Estee’s strong brands (which underpins its wide moat rating) and the firm’s expertise in developing compelling new products, with innovations representing 30% of fiscal 2021 sales, well above the 15% targeted by many consumer products companies. Skin care is well above prepandemic levels, but makeup continues to lag, as mask mandates curb demand. But the firm has promising innovations and marketing programs lined up that it will rollout as mandates relax.

Company’s Future Outlook

Fiscal 2021’s adjusted operating margin increased 420 basis points to 18.9%, given tight expense controls. This margin upside should continue into fiscal 2022, as management’s guidance for adjusted earnings per share of $7.23-$7.38 is above our $7.06 estimate, although sales growth guidance of 13%-16% brackets 15% estimate. No change is expected in $249 fair value estimate, as modestly higher operating margins should be offset by a higher tax rate, 

Company Profile

Estee Lauder Inc (NYSE: EL) is the world leader in the global prestige beauty market, participating across skincare (52% of 2020 sales), makeup (33%), fragrance (11%), and hair care (4%) categories, with popular brands such as Estee Lauder, Clinique, MAC, La Mer, Jo Malone, Aveda, Bobbi Brown, Too Faced, and Origins. The firm operates in 150 countries, with 26% of revenue stemming from the Americas, 44% from Europe, the Middle East and Africa, and 30% from Asia-Pacific. The company sells its products through department stores, travel retail, multi brand specialty beauty stores, brand-dedicated freestanding stores, e-commerce, salons/spas, and perfumeries.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks

Coles display strong FY21 results benefitting from pandemic

  • Increasing the penetration of private labels – COL just reaffirmed its objective of 40% penetration.
  • Earnings that are relatively safe (food tends to be largely non-discretionary).
  • In comparison to key domestic competition Woolworths, the valuation is undemanding.
  • Now that the company has been demerged, it has improved its focus and capital allocation.
  • Automation and enhancements in the supply chain should result in increased efficiency.
  • The deal with Ocado, in our opinion, positions Coles as a leader in online delivery.
  • Flybuys is a highly appealing asset that may be profited from.

Key Risks

  • Margins could be eroded by significant competitive pressures (including the introduction of new companies).
  • At the forthcoming Strategy update in June 2019, management will reset the earnings base.
  • Disruption on the internet (full online offering).
  • Upgrades to automation and supply chains will necessitate major capital investment, the cost of which has yet to be determined.
  • After accounting for leases, the balance sheet could be extended.
  • Cost inflation is outpacing revenue growth.

FY21 Results Highlights

Strategic sourcing and Smarter Selling benefits drove a 35-basis-point increase in gross margin in the top supermarkets. Since the Company introduced Coles Plus in February 21, the number of paid members has climbed by 6 times. Coles’ market share recovered to pre-Covid-19 levels in the fourth quarter of 2011, with a 4Q21 exit market share of 27.1 percent. This is higher than the 26.4 percent recorded in 2Q20. 

Management attributed this to the relaxation of limitations, which resulted in increased shopping centre performance and a slowing of the local shopping trend. The Ocado Customer Fulfilment Centres (CFC) will open in Melbourne in FY23 and Sydney in FY24, according to management.  In the fourth quarter, omnichannel customers spent 2.2 times more than in-store only shoppers, according to the findings. Coles now offers sale-day home delivery in over 300 stores, as well as Click & Collect at over 500 locations. 

Management did not disclose any earnings guidance in terms of dollars. However, sales growth in the crucial Supermarkets business was muted in the first seven weeks of 1Q22 trading, with sales up 1% on a headline basis and up 12% on a two-year basis.

Company Description  

Coles Group Ltd (COL) is an Australian retailer (supermarket and liquor) that was spun off from Wesfarmers (WES) in 2007. Coles handled more than 21 million customer transactions on average each week as of 30 June 2018, employing over 112,000 team members and operating 2,507 retail stores across the country. Supermarkets, Liquor, and Convenience are the company’s three primary operating segments. The company will also keep a 50 percent share in the flybuys loyalty programme.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Narrow-Moat Tapestry Closed Fiscal 2021 on a Good Note; Outlook Is Reasonable; Shares Attractive

Handbags and some types of apparel have been selling well as economies in the U.S. and greater China have recovered. We think Tapestry has good momentum as it enters fiscal 2022, so we expect to lift our per share fair value estimate of $43.50 by a mid-single-digit percentage. Tapestry is one of the few firms in the apparel and accessories space that we currently view as undervalued, especially after its share price slid 3% after the earnings report.

Against an easy comparison, Tapestry reported constant currency sales growth of 122% in the quarter, eclipsing our 118% estimate. More importantly, its sales rose 7% as compared with 2019, with most of the growth attributable to Coach. The Coach brand is the source of our narrow moat rating on Tapestry, and we think it is healthy enough to hold segment operating margins of 29%-30% in the long term. Meanwhile, we see signs of progress at both Kate Spade and Stuart Weitzman, although neither has significant growth from two years ago. We model sales growth rates of 5%-6% for these brands in the long run based on improved product and consumer engagement under the Acceleration Program.

Tapestry’s quarterly adjusted operating margin of 16.9% came in 40 basis points above our 16.5% forecast. As targeted by the Acceleration Program, the firm achieved the $200 million in gross expense savings in fiscal 2021 and expects to achieve $300 million in additional savings this year. These cost savings are somewhat offset by intended increases in marketing and e-commerce investment, which we view as prudent given the rising demand in China and elsewhere and ongoing e-commerce growth (55% for Coach in the fourth quarter).

Tapestry guided to fiscal 2022 EPS of $3.30-$3.35 on $6.4 billion in sales, above our forecast of $3.23 in EPS on $6.1 billion in sales. We think Tapestry’s outlook is achievable based on current momentum in the business. As its business has rebounded nicely from the pandemic, Tapestry has reinstated its dividend and plans to resume share repurchases. It intends to pay a dividend of $1 per share in fiscal 2022. It also guided to $500 million in repurchases in fiscal 2022, which would be its most since before the 2017 Kate Spade deal. We have a favourable view of this buyback plan as Tapestry trades below our fair value estimate and has a reasonable valuation (forward P/E of about 12). Meanwhile, we think Tapestry may look for another large acquisition in the future. The firm’s new CEO, Scott Roe, has considerable experience with acquisitions from his time at narrow-moat VF. Our capital allocation rating on Tapestry is Standard.

Company Profile

Coach, Kate Spade, and Stuart Weitzman are the fashion and accessory brands that comprise Tapestry. The firm’s products are sold through about 1,500 company-operated stores, wholesale channels, and e-commerce in North America (62% of fiscal 2020 sales), Europe, Asia (32% of fiscal 2020 sales), and elsewhere. Coach (71% of fiscal 2020 sales) is best known for affordable luxury leather products. Kate Spade (23% of fiscal 2020 sales) is known for colourful patterns and graphics. Women’s handbags and accessories produced 68% of Tapestry’s sales in fiscal 2020. Stuart Weitzman, Tapestry’s smallest brand, generates nearly all (98%) of its revenue from women’s footwear.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks

Persistent Sydney Lockdowns Will Weigh on Star’s Core Casino

the ramp-up of Queens Wharf and Gold Coast growth projects, and solid performance from its Sydney property, despite increased competition. The Star casino in Sydney is the company’s core asset, which has historically generated approximately 70% of group earnings as the city’s only casino. The New South Wales government only issued the second licence because The Star’s performance significantly lagged Crown Melbourne in both revenue and EBITDA, depriving the state of taxation revenue. 

The Star Sydney’s EBITDA is roughly 60% of Crown Melbourne’s, despite Sydney being Australia’s largest city and the international gateway into Australia. The AUD 2.6 billion Queen’s Wharf joint venture development in Brisbane has been rewarded with a new 99-year lease and 25-year exclusivity period when it opens in 2022 (to replace the current Brisbane licence). 

Financial Strength

The Star Entertainment’s balance sheet has improved over fiscal 2021 following asset sales, a halt to the dividend, and relatively low levels of capital expenditure. Leverage, measured as net debt/adjusted EBITDA, moderated to 2.7 in fiscal 2021, from over 3 in fiscal 2020. Additional asset sales are slated for fiscal 2022 to further strengthen the balance sheet. With an improved balance sheet, we forecast the resumption of dividends in the second half of fiscal 2022 at around 75% of underlying earnings. The company has flagged it will not start paying dividends until the firm’s net debt/EBITDA improves to below 2.5. 

Our fair value estimate for shares in no-moat Star Entertainment to AUD 4.10 from AUD 4.00 previously, as lower near-term earnings forecasts are more than offset by time value of money. The firm’s fiscal 2021 results broadly tracked our expectations, with underlying EBITDA of AUD 430 million flat on the previous corresponding period, or pcp, and 1% higher than our prior forecast. Star is beginning the year with some familiar challenges. Persistent lockdowns are weighing on the core Star Sydney property, which has remained closed since late June 2021. our outlook for both table gaming and VIP gaming in Star Sydney, and lower our fiscal 2022 full-year EBITDA forecast by 6% to AUD 449 million. But our longer-term view of Star remains intact.

Bulls Say’s 

  • Despite competition, The Star’s core Sydney casino provides an opportunity to turn around operations and grow in Australia’s most populous market.
  • The Star is well-positioned to benefit from the emerging middle and upper class in China.
  • Long-dated licences to operate the only casino in Brisbane and the Gold Coast, including licensed exclusivity in Brisbane, provide The Star an opportunity to generate strong returns in a regulated environment.

Company Profile 

The Star Entertainment Group operates three hotel and casino complexes in Australia: The Star in Sydney (licence expiring in 2093, with electronic gaming machine exclusivity expiring in 2041), The Star Gold Coast (a perpetual licence), and Treasury Casino and Hotel in Brisbane (licence expiring in 2070). The Queen’s Wharf development in Brisbane will have a 99-year licence on completion in 2022 (with a 25-year exclusivity period), replacing the Treasury Casino and Hotel, which will be repurposed into a hotel and retail site.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Baby Bunting Group (ASX: BBN)

  • BBN has the largest presence in Australia amongst specialty baby goods retailers.
  • Low risk that online sales threaten high service business model of brick-and- mortar stores to showcase goods and in-store advice.
  • Solid growth story via new store openings (targeting 100+ stores network).
  • Strong market shares (currently sits at 30% in a highly fragmented market).
  • NZ’s $450m addressable market represents another opportunity.

Key Risks

  • Retail environment and general economic conditions in addressable markets may deteriorate.
  • Competition may intensify especially from online retailers such as Amazon, specialty retailers, department stores, and discounted department stores.
  • Customer buying habits/trends may change. Rapid changes in customer buying habits and preferences may make it difficult for the Company to keep up with and respond to customer demands.
  • Higher operating and occupancy costs. Any increase in operating costs especially labour costs will affect the Company’s profitability.
  • Poor inventory control and product sourcing may be disrupted.
  • Management performance risks such as poor execution of store rollout especially into ex-metro areas.

FY21 result highlights

Sales of $468.4m were up +15.6%, with same-store comparable sales up +11.3%. Online sales grew by +54.2% and now make up 19.4% of total sales (vs. 14.5% in PCP). Gross profit of $173.7m was up +18.3% on PCP, with GP margin up +83bps to 37.1%. Cost of doing business (CODB) as a percentage of sales improved 14bps to 27.8%, aided by store expense leverage and warehouse volume leverage (cost fractionalization). Operating earnings (EBITDA) were up +29.2% to $43.5m (with EBITDA margin up +100bps to 9.3%) and NPAT was up +34.8% to $26.0m.Operating cash flow was weaker versus pcp, driven by higher working capital – driven by an increase in inventories and also cycling particularly low levels in the pcp. 

 The Company declared a final dividend of 8.3cps, taking the full year dividend to 14.1cps (up +34.1% on PCP). The Board continues to target a payout ratio in the range of 70-100% pro forma NPAT. Private label sales were up +31.1% vs pcp and now make up 41.4% of group sales (vs. 36.5% in FY20). The Company remains on target to achieve 50%of sales from private sales. Outlook guidance: Similar to last year, no earnings guidance was provided for FY22 due to Covid-19 related uncertainty. However, year-to-date trading update suggest the Company is feeling the impacts of the current lockdowns – comparable store sales are down -6.4% YTD (impacted by stay at home orders), online sales are up a healthy +32.6% however much lower than pcp and excluding the most impacted state (NSW) comparable sales are up a subdued +1.0%.

Company Description

Baby Bunting Group Limited (BBN) is Australia’s largest nursery retailer and one- stop-baby shop with 42 stores across Australia. The company is a specialist retailer catering to parents with children from newborn to 3 years of age. Products include Prams, Car Seats, Carriers, Furniture, Nursery, and Safety, Baby wear, Manchester, Changing, Toys, Feeding and others.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Applied Materials Inc poised for Remarkable Growth in Fiscal 2021

 It has been observed that Applied Materials and its peers have all called for strong growth in 2021, driven by record capital expenditure levels at TSMC (Taiwan Semiconductor Manufacturing Company) and Intel as well as solid memory spending.

Third-quarter sales rose 41% year over year to $6.2 billion, led by a 53% increase in the semiconductor systems group (SSG) revenue. Within SSG, equipment sales to logic and foundry customers grew 75% year over year. This strength has been attributed to investments supporting leading-edge process technologies at the likes of TSMC as well as lagging-edge processes that support end markets such as automotive and Internet of Things. Memory equipment sales also grew 26% year over year. Foundry and logic are expected to be the biggest growth drivers for Applied’s SSG sales in 2021.

Financial Strength:

The last price for Applied Materials Inc. was USD 129.20, whereas its fair value has been estimated to be USD 131. Besides, PE ratio of Applied during 2020 was 14.2, making it undervalued with reference to its sector. This suggests that there is room for growth of the Applied Materials Inc. 

Management expects Applied’s fourth-quarter revenue to be up by 34% year over year at the midpoint, with momentum persisting into 2022. Also, the sales of Applied are expected to be $6.3 billion at the midpoint, with SSG at $4.6 billion, services at $1.3 billion, and display at $400 million.

Quarterly services revenue was nearly $1.3 billion and was up 24% year over year. In recent years, services and part sales from long-term service agreements have grown from 40% to 87% of total service revenue. 

Company Profile:

Applied Materials is one of the world’s largest suppliers of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm’s systems are used in nearly every major process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer- and reticle-inspection, critical dimension measurement, and defect-inspection scanning electron microscopes.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks

Increase in Winnebago Industries’ dividend by 50%

 customized specialty vehicles, and parts and services. Winnebago Industries’ strong brand equity in recreational vehicles and its balance sheet would allow the firm to persevere through economic turmoil. 

The top three motor home manufacturers (Thor, Forest River, and Winnebago) make up about 80% of the North American motor home market. Winnebago has reinvented itself under CEO Mike Happe with the November 2016 acquisition of high-end towable maker Grand Design and sees itself as a leading outdoor lifestyle firm rather than just a maker of RVs. Acquisitions in the $700 billion-plus outdoor activity market also play a role. Over 60% of U.S. households’ camp at least occasionally and 12% camp more than three times a year. Millennial and Gen X campers are 81% of new U.S. campers, and 82% of new campers since the pandemic have children, so Winnebago has plenty of runway with younger consumers if it executes right.

Financial Strength:

The balance sheet lacks the massive legacy costs that burden some other manufacturers because Winnebago’s workforce is not unionized. Winnebago’s untapped $192.5 million credit line coupled with $405.8 million of cash at the end of the third quarter of fiscal 2021 would get the firm through nearly any challenge. 

A 9% increase in the dividend in summer 2020, despite the pandemic at the time, is a good sign of financial health, as is a 50% increase announced in August 2021.Winnebago’s balance sheet had been free of long-term debt since the mid-1990s. Net debt/adjusted EBITDA was 1.7 times at the end of fiscal 2020. Winnebago has no significant pension obligations and stopped paying retiree healthcare in 2017. Revenue was about $2.35 billion in fiscal 2020.

Bulls Say:

The Grand Design acquisition materially raised Winnebago’s operating margin, and Newmar could do

the same.

The company’s strong balance sheet provides financial strength and flexibility to withstand cyclical downturns.

Because RV consumers are relatively affluent, rising gas prices would probably not hinder a consumer’s ability to purchase a motor home. A 2016 study by travel consulting firm PKF Consulting found that for a family of four, gas prices would have to exceed $12 a gallon to make RV travel more expensive than other forms of travel.

Company Profile:

Winnebago Industries manufactures Class A, B, and C motor homes along with towables, customized specialty vehicles, and parts and services. With headquarters in Eden Prairie, Minnesota, Winnebago has been producing recreational vehicles since 1958. Class A motor homes account for 31% of motorized unit sales, Class B about 41%, and Class C the rest.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Steadfast Puts a Strong Shareprice to Work; Recommend Passing on This SPP

Insurers putting up rates to improve their own margins provides a nice tailwind for the resilient insurance broking industry. Steadfast will pay AUD 411.5 million for Coverforce, an EBITA multiple of 11 times after cost synergies. While the multiple is higher than the 9-10 times often paid for broker businesses, given Steadfast is funding the purchase with expensive shares, the deal is still attractive. Coverforce is the largest privately owned broker business in the network, overseeing AUD 530 million of GWP in fiscal 2021. Losing this group would not have been a good look for Steadfast.

The acquisition is straight from the playbook that has served Steadfast well. Owners often look to sell all or part of their broking business to release equity or as part of a succession plan. A share purchase plan to raise an additional AUD 20 million will also be offered. The SPP price will be set at the lower of the institutional placement price or 1% discount to the VWAP of Steadfast shares over the five trading days to September 13, 2021. Around 60% of Steadfast’s EBITA growth was organic, both volume and price increases. The remainder, from acquisitions and increased equity holdings in brokers within its network. The growth strategy reinforces the businesses competitive advantages and strengthens customer switching costs.

With insurers generating poor returns on capital, we expect premium rate increases to continue at around 5% per annum in fiscal 2022, but moderate to 2-3% per annum longer-term. The acquisition of Coverforce lifts Steadfast’s equity ownership in brokers within the network to 37% from 32%, leaving a long tail of investment opportunities over the long-term. Our forecasts assume annual NPAT growth of 14% per annum over the five-years to fiscal 2026.

Steadfast’s Future Outlook 

Our forecast sits above the range, with NPAT of AUD 174 million. We think management guidance is conservative given the price increases insurers are pushing to improve their own returns. We increase our fair value estimate 8% to AUD 4.00 per share as we incorporate the acquisition of Coverforce. We assume a 12% increase in shares on issue to fund the acquisition. We think the acquisition is likely to be a success. We do not recommend participating in the share purchase plan given the issue price is set at a floor of AUD 4.35 per share, a 9% premium to our fair value estimate. Steadfast is a good business, but expensive.

Back on the result, one aspect that missed our expectations was GWP on the Steadfast Client Trading Platform, or SCTP. Premiums on the platform increased 24% in fiscal 2021, but still make up less than 8% of broker GWP. Being more profitable for Steadfast, success here will provide an additional tailwind to earnings. e assume around 40% of GWP is written on the platform by fiscal 2026, down from our prior forecast of 50%, as it is taking longer than expected for insurers to integrate products onto the new platform.

Company Profile 

Steadfast Group is the largest general insurance broker network in Australia and New Zealand, with over 450 brokers and 2,000 offices in Australia, New Zealand, Singapore, and London. Steadfast operates as both a broker and a consolidator via equity interests in insurance broker businesses, generating close to AUD 10 billion of network broker gross written premium annually. Steadfast also co-owns and consolidates underwriting agencies and other complementary businesses.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Berkshire’s Equities in Q2; Apple Remains Top Stock

selling some $2.1 billion worth of stock while also acquiring a little over $1 billion of equities. Based on the insurer’s recent 13- F filing, Berkshire trimmed positions in US Bancorp and Chevron, and sold off more than 10% of the investment portfolio’s stakes in Abbvie (selling 2.3 million shares or 10.2% of its holdings), General Motors (7.0 million shares or 10.4% of its holdings), Bristol-Myers Squibb (4.7 million shares or 15.3% of its holdings), and Marsh & McLennan (1.1 million shares or 20.6% of its holdings). Berkshire also disposed of meaningful amounts of Merck (8.7 million shares, or 48.8% of its holdings) and Liberty Global Cl C shares (5.5 million shares, or 74.5% of its holdings), while completely eliminating the firm’s holdings in Liberty Global Cl A, Biogen, and Axalta Coating Systems.

As for the purchases, almost all of them involved existing holdings as Berkshire added to stakes in Kroger (picking up 10.7 million shares and increasing its position by 21.0%), Aon (around 300,000 shares and increasing its position by 7.3%), and Restoration Hardware (35,500 shares for a 2.0% increase in the company’s holdings). Berkshire had originated stakes in the pharmaceuticals–AbbVie, Biogen, Bristol Myers Squibb and Merck–as well as the insurance brokers—Marsh & McLennan and Aon–in just the past year and a half, but many of these stocks have seen marked gains in just the past few quarters, allowing the insurer’s main managers of many of these smaller holdings (relative to the portfolio overall)–CEO Warren Buffett’s two lieutenants Todd Combs and Ted Weschler–to take some profit off the table. Even so, the firm ended the second quarter with $293.0 billion of reportable equity holdings.

Berkshire’s top 5 positions of Apple (41.5%), Bank of America (14.2%), American Express (8.6%),Coca-Cola (7.4%), and Kraft Heinz (4.5%), accounted for 76.2% of the insurer’s 13-F equity portfolio, and its top 10 holdings, which included Moody’s (3.1%), Verizon Communications (3.0%), US Bancorp (2.5%), DaVita (1.5%), and Charter Communications (1.3%), accounted for 87.5%. Given the changes in Berkshire’s 13-F portfolio during the second quarter, the financial services sector now accounts for 28.7% of the portfolio (up from 28.5% at the end of March 2021), with technology stocks at 43.2% (up from 41.8%), and consumer defensive names decreasing to 12.8% (from 13.3%).

Company Profile 

Berkshire Hathaway is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm’s core business segment is insurance, run primarily through Geico, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group. Berkshire has used the excess cash thrown off from these and its other operations over the years to acquire Burlington Northern Santa Fe (railroad), Berkshire Hathaway Energy (utilities and energy distributors), and the firms that make up its manufacturing, service, and retailing operations (which include five of Berkshire’s largest noninsurance pretax earnings generators: Precision Castparts, Lubrizol, Clayton Homes, Marmon and IMC/ISCAR). The conglomerate is unique in that it is run on a completely decentralized basis. 

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.