Last week was very eventful in the capital markets with all kinds of pertinent news. In a ruling which will be contested in the courts for many years, the FCC decided to adopt 'net neutrality' provisions ensuring content providers will not face different fees based on usage and other system specifics. On the surface, companies like Netflix, Amazon.com, Google, Apple, and Facebook seem to benefit. Large cable and telecom providers like Comcast, ATT, Verizon, and Time Warner Cable could be potential losers. Certainly, the ruling may have far reaching ramifications on the Comcast-Time Warner Cable acquisition and whether it will ultimately be completed or scrapped. Much will depend on the provisions and restrictions the same FCC and Justice Department require the companies to comply with. Those decisions will take place in a month and really are the main event for all participants.
Elsewhere, there was a plethora of earnings reports from a wide variety of companies, especially in the retail area. Target posted a good number, while Sears and JCP registered their typical disappointments. Cracker Barrel posted a large beat, which is reflective of what has been taking place across the entire restaurant and dining sector. Last week, Jack In the Box also posted strong numbers. In technology, Hewlett Packard had a big miss while Salesforce again surprised, which is now just typical, especially after ten years of taking share from every vendor in the enterpise arena. Weight Watchers and Lumber Liquidators both got crushed after they guided down. Lumber Liquidators also revealed an upcoming Sixty Minutes presentation will not present them in the most favorable light, to say the least. In the media and entertainment world, Liberty Media's holdings reported mostly strong numbers.
Warren Buffett released his annual shareholder letter this morning, the 50th of the fabled Berkshire Hathaway company. The document was much longer than usual and is a treasure trove of excellent informaion for investors who are interested in understanding how Buffett sees his company and the future. As has historically been the case, Buffett gives a great deal of credit to his partner, Charlie Munger, for helping him change how he invested capital. It was interesting to also see how the company has been transformed over the last few years by large acquisitions of operating entities like Burlington Northern (railroads), and other companies in highly regulated industries (energy). On the investment side, as has typically been the case with Buffett, he concentrates a great deal of capital into a few positions. In fact, four holdings make up nearly sixty percent of all investment positions. Yes, diversification is important, and most individual investors cannot buy entire companies like Berkshire can. Still, allocating capital is about being correct and placing big bets when you feel you have a better understanding of the value of a company versus the market price. Highly concentrated positions are a long time characteristic of the Buffet-Munger modus operendi.
Finally, one of Buffett's early associates, Irving Kahn, died this week at the ripe old age of 109. He kept investing and working all the way up to his passing. In fact, he still went to the office three times a week. The world, and specifically, the investment world, was a better place because of Mr. Kahn. Thank you for reading the blog this week, and if you have comments, questions, or thoughts about the blog, please email me at
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