How Warren Buffett Uses Discount Rates To Value Stocks
Warren Buffett has never detailed the process he uses to value the businesses he acquires for Berkshire Hathaway. However, over the years, he has provided some limited insight into his methods. Q3 2020 hedge fund letters, conferences and more Based on these comments, it is widely assumed that Buffett uses a discount cash flow model Read More
- US: Dow: 13172.10 (0.02%), S&P 500: 1403.93 (-0.01%), NASDAQ: 3016.98 (-0.18%)
- Europe: CAC: 3450.27 (0.69%), DAX: 6974.39 (0.93%), FTSE: 5864.78 (0.56%).
- Asia-Pacific: Australia: 4292.20 (0.21%), China: 2142.52 (0.30%), Hong Kong: 20291.68 (1.04%), India: 5380.35 (0.61%), Japan: 8929.88 (0.50%).
- Metals: Gold: 1602.40 (-0.63%), Silver: 27.76 (-0.01%), Copper: 3.36 (0.16%)
- Energy: Crude Oil: 93.43 (0.75%), Natural Gas: 2.83 (3.85%)
- Commodities: Corn: 7.89 (-0.41%), Soya Bean: 15.98 (-0.17%), Wheat: 8.58 (-2.00%)
- Currency: Euro (€) / US Dollar ($) (EURUSD): 1.2321 (0.08%), British Pound Sterling (UK£) / US Dollar ($) (GBPUSD): 1.5678 (0.03%), US Dollar ($) / Japanese Yen (¥) (USDJPY): 78.7350 (0.54%)
- 10 year US Treasury: 1.738% (0.074)
Market and Economy News Update
U.S. markets end largely unchanged: U.S. markets gave up gains in the final hour of trading to finish nearly flat on Tuesday as a fall in technology and financial shares reversed gains made earlier in the day amid strong U.S. retail sales data and better than expected economic news from the euro zone. The Dow Jones Industrial Average (INDEXDJX:.DJI) eked out a gain of 2.71 points, or 0.02 percent, to finish at 13,172.14. The S&P 500 (INDEXSP:.INX) slipped 0.18 points, or 0.01 percent, to end at 1,403.93, while the NASDAQ Composite (INDEXNASDAQ:.IXIC) fell 5.54 points, or 0.18 percent, to close at 3,016.98.
Oil prices end higher: Oil prices increased on Tuesday to the highest level in a week as better than expected U.S. retail sales and positive macroeconomic reports from the euro zone turned investors more optimistic about prospects for oil demand. Crude oil for September delivery gained 0.8 percent, to settle at $93.43 a barrel on the New York Mercantile Exchange. Brent oil for September settlement rose 0.3 percent to $113.99 a barrel on the London-based ICE Futures Europe exchange.
Stocks in Focus
- Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) significantly reduced its holdings of Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG) and Kraft Foods Inc (NASDAQ:KFT) during the second quarter, according to an SEC filing. Berkshire added about 2.84 million shares of oilfield equipment-maker National-Oilwell Varco, Inc. (NYSE:NOV) and another 27 million shares of refiner Phillips 66 (NYSE:PSX), which is now worth about $1 billion.
- British bank Standard Chartered PLC (LON:STAN) (HKG:2888) agreed to pay New York’s banking regulator $340 million to settle allegations that it colluded with the Iranian government to hide transactions worth at least $250 billion.
- The New York Times Company (NYSE:NYT) has named BBC Director General Mark Thompson as its next president and chief executive officer.
- Fiber optic equipment maker JDS Uniphase Corporation (NASDAQ:JDSU) reported fourth quarter adjusted earnings of 15 cents a share, on revenue of $439.3 million that beat the average analysts’ estimate of earnings of 12 cents a share on $423 million in revenue.
- Wells Fargo & Company (NYSE:WFC) will pay more than $6.5 million to settle Securities and Exchange Commission charges that the bank’s brokerage arm improperly sold complex mortgage-backed instruments without fully disclosing the risks to investors.
- Restaurant chain operator Bob Evans Farms Inc (NASDAQ:BOBE) posted first quarter earnings excluding items of 58 cents a share, slightly missing analysts’ estimates of 60 a share. The company raised its quarterly dividend and projected better than expected full-year earnings.
- Paints and coatings maker The Valspar Corporation (NYSE:VAL) fell 4.2 percent after quarterly sales missed estimates. The company reported second quarter adjusted earnings of 97 cents per share, on revenue of $1.08 billion. Analysts were expecting a profit of 96 cents a share, on $1.13 billion in revenue.
- Troubled retailer Sears Holdings Corporation (NASDAQ:SHLD) is planning to sell-off its Lands End unit as part of a major restructuring process, the New York Post reported today.
- Online business review service Angie’s List Inc (NASDAQ:ANGI) plunged 16 percent after the end of a 90-day lock-up period that had prevented the owners of 25.2 million shares from selling their stock until Tuesday.
- U.S. medical device maker Teleflex Incorporated (NYSE:TFX) ended 1.6 percent higher after agreeing to buy Netherlands-based provider of medical equipment to anesthetists, LMA International NV, for about $276 million in cash.
- Video delivery company Envivio Inc (NASDAQ:ENVI) slashed its second-quarter revenue forecast to between $10 million and $11 million, from its earlier range of $17 million to $18 million. Analysts were expecting revenue of $10.7 million. The stock ended percent lower after the news.
- ATM maker NCR Corporation (NYSE:NCR) is investigating anonymous allegations regarding some of its business practices in China and Middle East, the Wall Street Journal reported.
- Chinese maker of electronic navigation tools AutoNavi Holdings Ltd (ADR) (NASDAQ:AMAP) reported an 8 percent decline in second quarter profit to $8.8 million, or 4 cents per American depository share, from $9.6 million, or 5 cents per share, a year earlier. Quarterly revenue was up 22 percent to $40.2 million.
- Ski resort chain Vail Resorts, Inc. (NYSE:MTN) said Chief Financial Officer Jeff Jones will step-down at the end of the year.
Hedge Fund News Update
- Dan Loeb’s Third Point reduced its stake in Capital One Financial Corp. (NYSE:COF), and increased its positions in Liberty Global Inc. (NASDAQ:LBTYA) and J. C. Penney Company, Inc. (NYSE:JCP), according to latest 13F filing. The hedge fund took new positions in Advance Auto Parts, Inc. (NYSE:AAP), Aetna Inc. (NYSE:AET), Cabot Oil & Gas Corporation (NYSE:COG) and Chesapeake Energy Corporation (NYSE:CHK), and dissolved its stakes in Abercrombie & Fitch Co. (NYSE:ANF), Sysco Corporation (NYSE:SYY), Devon Energy Corporation (NYSE:DVN), Google Inc (NASDAQ:GOOG), Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Company (NYSE:WFC).
- Bill Ackman’s Pershing Square acquired new positions in The Procter & Gamble Company (NYSE:PG), and dissolved its stakes in Kraft Foods Inc (NASDAQ:KFT), Family Dollar Stores, Inc. (NYSE:FDO) and Fortune Brands Home & Security Inc (NYSE:FBHS), according to its latest 13F filing.
- New York-based hedge fund firm Tiger Global Management increased its stake in Amazon.com, Inc. (NASDAQ:AMZN) by 90 percent, massively increased its stake in Linkedin Corporation (NASDAQ:LNKD) and offloaded its position in Yelp Inc (NYSE:YELP) in the second quarter, according to 13F regulatory filing.
- One of Europe’s most prominent hedge funds, Lansdowne Partners LP, raised its stakes in Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN), but reduced its stake in The Coca-Cola Company (NYSE:KO), according to a filing with the U.S. Securities and Exchange Commission.
- New York-based hedge fund Tiger Asia Management LLC, a spin-off of Tiger Management, the hedge fund founded by Julian Robertson, will return outside capital to investors by the end of the month amid a probe by Hong Kong regulators into possible insider trading.
- Hedge funds and other alternative investment firms are sitting on a whopping 60 billion euros ($74 billion) to invest in distressed European debt, according to a report in Bloomberg News.
- Philippe Laffont’s Coatue Management bought 185,000 shares of Mexican restaurant chain Chipotle Mexican Grill, Inc. (NYSE:CMG) in the second quarter, with total holdings now standing at 567,102 shares.
- Tom Steyer’s Farallon Capital owned 4 million shares of gas pipeline company Kinder Morgan Inc (NYSE:KMI), at the end of the second quarter, and had warrants to acquire another 5.2 million shares, according to 13-F filings. Farallon Capital held 22.5 million shares of Kinder Morgan Inc at the end of the first quarter.
Brokerage Upgrades and Downgrades on Tuesday, August 14, 2012
- Elan Corporation, plc (ADR) (NYSE:ELN) was upgraded to “buy” from “neutral” by analysts at UBS AG.
- Wright Medical Group, Inc. (NASDAQ:WMGI) was raised to “buy” from “neutral” by analysts at Mizuho with a target price of $24.
- Ballard Power Systems Inc. (USA) (NASDAQ:BLDP) was downgraded to “hold” from “accumulate” by analysts at Ardour Capital with a target price of $1.
- Ciena Corporation (NASDAQ:CIEN) was lowered to “market perform” from “outperform” by analysts at FBR Capital with a target price of $18.
- Envivio Inc (NASDAQ:ENVI) was cut to “neutral” from “buy” at Goldman Sachs.
- Expedia Inc (NASDAQ:EXPE) was downgraded to “hold” from “buy” by analysts at Stifel Nicolaus.
- Global Payments Inc (NYSE:GPN) was lowered to “hold” from “buy” at Stifel Nicolaus.
- Groupon Inc (NASDAQ:GRPN) was cut to “neutral” from “buy” by analysts at Citigroup.
- New York & Company, Inc. (NYSE:NWY) was downgraded to “neutral” from “buy” by analysts at Janney Montgomery Scott with a target price of $4.
- Pearson PLC (ADR) (NYSE:PSO) was lowered to “equal weight” from “overweight” by analysts at Morgan Stanley.
- Syntel, Inc. (NASDAQ:SYNT) was cut by analysts at JPMorgan Chase from “overweight” to “neutral.”
- Scientific Games Corp (NASDAQ:SGMS) was downgraded by analysts at Deutsche Bank from a “buy” rating to a “hold” rating.
- Southwest Airlines Co. (NYSE:LUV) was lowered to “underperform” from “neutral” by analysts at Bank of America.
- Thompson Creek Metals Company Inc (USA) (NYSE:TC) was cut to “hold” from “buy” by analysts at TD Securities.
- Vale SA (ADR) (NYSE:VALE) was downgraded by analysts at Bank of America from a “buy” rating to a “neutral” rating.