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- Alpha Report Issue #69
Alpha Report Issue #69
Warren Buffett's Annual Letter Is... BAD
Brandon
February 23, 2025
Hey guys!
I will be sending out my Alpha Report for FREE every Sunday!
I always want to create more value for you guys and this report is only going to get better!
Enjoy!
-Brandon
Fear & Greed Index👇
Current read is 35 on the fear greed index vs 44 last week.
I feel that we are closer to 55 vs what this says, so in balance.
Market Fearful = Potential Opportunity/Deals.
Market Greedy = Potential Over Valuation.
Current Interest Rates👇
30 year fixed mortgage rate falls to 6.84% Today vs 6.95% last Sunday.
10 year treasury bond yield falls to 4.43% Today, vs 4.47% last Sunday.
2 year treasury bond yield falls to 4.20% Today, vs 4.26% last Sunday.
So overall this is what I want to see!
Remember, bonds compete with stocks.
As bond yields fall, bonds look less attractive and stocks look more attractive.
Remember, interest rates are gravity on the stock market!
Warren Buffett Spoke👇
When Billionaires like Warren speak, we as investors need to listen and learn. So yesterday, we got Warren Buffett’s annual letter to shareholders. I have been reading every single word of these for years and lots can be taken from it both implied and actually said. Let’s break it down!
Breakdown Rules👇
So I will list the 10 most important quotes he said here.
Then I will break them down below the quoted section.
I will number them so it's easier to reference when I break it down.
Key Things He Said👇
“We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly-liquid short-term securities.”
“Though the year-by-year numbers will swing wildly and unpredictably. Our horizon for such commitments is almost always far longer than a single year. In many, our thinking involves decades. These long-termers are the purchases that sometimes make the cash register ring like church bells.”
“To be precise, Berkshire last year made four payments to the IRS that totaled $26.8 billion. That’s about 5% of what all of corporate America paid.”
“Understandably, really outstanding businesses are very seldom offered in their entirety, but small fractions of these gems can be purchased Monday through Friday on Wall Street and, very occasionally, they sell at bargain prices.”
“Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities.”
“With marketable equities, it is easier to change course when I make a mistake. Berkshire’s present size, it should be underscored, diminishes this valuable option. We can’t come and go on a dime. Sometimes a year or more is required to establish or divest an investment.”
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change. While our ownership in marketable equities moved downward last year from $354 billion to $272 billion, the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio.”
“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”
“Paper money can see its value evaporate if fiscal folly prevails. In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency.”
“In a very minor way, Berkshire shareholders have participated in the American miracle by foregoing dividends, thereby electing to reinvest rather than consume. Originally, this reinvestment was tiny, almost meaningless, but over time, it mushroomed, reflecting the mixture of a sustained culture of savings, combined with the magic of long-term compounding.”
My Breakdown In English👇
Remember, number 1 here = my comments on number 1 above for the quote & so on.
They made lots of "guaranteed" money cause they have lots of cash invested in government bonds. The bond yields went up quite a bit and he is taking advantage of that guaranteed ROI at a time he can not find better allocation of capital in the market.
He is essentially saying when they buy a company either in part or whole, they play to hold it for longer than one year. The longer you hold something, the safer and more money you will likely make if you bought it right. (hmmm this sounds familiar!)
He is kinda bashing other companies here implying they don't pay their fair share of taxes.
Entire businesses that would move the needle for berkshire are often not for sale at good prices. This is because if the company is so good, why is it even for sale. Berkshire is dealing with the problem of being too big. In order to make a needle mover aquisition, it needs to be HUGE. He is saying they can oftern get more opportunities in partial ownership of companies cause "Mr.Market" often hands out deals in the open market. Warren has always said in the past they would rather buy entire businesses, but it is harder vs partial.
He is saying most of the time nothing is selling for prices worth while. Very rarely is there deals all over the place. This is what I talk about all the time. Being a good investor is about saying no to a lot of things!
Warren is saying that berkshire is so large that they do not have the benefit we do of being able to get in and out of the market on a "dime". It often takes them many months to roll out of a position cause the siz eof their stake is so large. We have the benefit of being able to instantly pull put.
He is talking crap on people commenting on the huge cash pile at berkshire. He is essentially saying most of the money is still in companies (aka stocks) (aka equities) Now here is a key point. He owns Gieco straight up for example. That is not a company that gets priced by Mr. Market on a daily basis. So what about those companies? They still own all of them and the values are actually going up too in the background. So yea the ones that get "quoted" (public companies) he did sell some, the non quoted ones he held. Now this is the interesting thing. This is kinda like stocks vs real estate. Real estate is not quoted. Stocks are. Real estate prices are much more stable on a month to month basis vs stocks. Cause there is no Mr. Market and no fear/greed component. So maybe he is saying there is greed in the market, so this means we are rotating quoted assets into bonds till thee is fea rin the quoted markets.
He is saying he will never prefer bonds over companies (partial ownership or whole) Kinda implying things are lofty.
Essentially saying bonds are not a hedge against inflation. Again, he talks all this crap on bonds, yet he is heavy them.
He talks about why reinvesting the money Berkshire made is much better vs consuming and paying out the dividends. (paying out dividends makes companies worth less and they have less capital for M&A)
To Summarize👇
When Billionaires like Warren speak, we as investors need to listen and learn.
He is bullish America but thinks things are a little lofty.
Not a bubble, but a little lofty.
If bond yields fall, I would expect him to rotate into stocks cause bonds are less appealing.
He plays the long game & he is worth BILLIONS.
Make ultra high margin of safety plays and use options to magnify your returns.
That is it. Keep it simple…
Don’t know how to spot deals and use options the right way?
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Economic Calendar For: Feb 24-28, 2025
All times in PST
Monday, Feb 24👇
Dominos Pizza Earnings (pre market)
Hims Earnings (post market)
Tuesday, Feb 25👇
7a Consumer confidence
Lucid Earnings (post market)
Intuit Earnings (post market)
Wednesday, Feb 26👇
7a New home sales
Nvidia Earnings (post market)
Salesforce Earnings (post market)
Snowflake Earnings (post market)
Thursday, Feb 27👇
530a Initial Jobless Claims
530a GDP data
530a Durable goods orders
Vistra Earnings (pre market)
Dell Earnings (post market)
Friday, Feb 28👇
530a PCE data
I will be breaking all of this down in real time in course members only discord!
👇Price Targets For End Of Year 2025
(updated daily)
I moved all trades and potential plays to course members ONLY Discord!
Take your game to the next level. Do my course. Come into my mastermind Discord!
QQQ - $560
VOO- $580
IWM- $230
SOXX- $240
TSLA - $390
NVDA- $175
AAPL - $250
PLTR- $85
AMZN- $245
GOOG - $200
MSFT - $445
JPM - $295
SOFI - $12
TSM - $225
AMD - $135
META - $750
MU - $130
BITCOIN - $90,000
SOLANA - $235
👇Price Targets For End Of Year 2030
QQQ- $830 (assuming 8% annual ROI)
VOO- $830 (assuming 7% annual ROI)
SOXX- $360 (assuming 8% annual ROI)
TSLA- $1,200 (assuming 18% annual ROI)
NVDA- $645 (assuming 25% annual ROI)
AAPL - $375 (assuming 7% annual ROI)
AMZN- $550 (assuming 15% annual ROI)
MSFT - $1,000 (assuming 15% annual ROI)
NVDA - $1,250 (assuming 45% annual ROI)
(of course a lot of these will split, this is non split adjusted)
👇Current Value of My Trading Account👇
(updated every Sunday)
👇Yearly Account Account Value
December 2018 - $0
December 2019 - $45,251
December 2020 - $150,191
December 2021 - $267,524
December 2022- $290,315
December 2023 - $506,223
December 2024 - $927,796
IN PROGRESS 2025 - $937,726
👇Portfolio Thoughts
Amazing growth from 2018 to Current all off of a total contribution of $90,000.
That is over a 10x in 7 years!
I did this in a very low risk and conservative way.
Month to month and even year to year volatility is irrelevant.
I see volatility as opportunity!
My goal is $5,000,000 in this account by 2030.
I see this as very achievable and if the market dips further, I will capitalize heavily, just like I did in 2022!
Stay the course and keep your emotions in check!