Buffett Show

By Hoda Mehr Mon, May 4, 2020

Hey Scoopers,

With Friday’s 2% to 3% decline by all three indices, the stock market finished last week, almost near where it had started it. — More on that in the “Overall Market” section.

Beyond the overall market, it looks like the red lipstick effect is in full force, pushing the stock price of a cosmetics company higher up. At the same time, cruise lines are in bigger trouble. — More on that in the “What’s Up?” and “What’s Down?” sections.

Oh, by the way, did you watch Warren Buffett’s show on Saturday? We did, and we learned a few things. — More on that in the “Water Cooler” section.

But, first, here is a recap of what happened in the market on last week:

Market Recap

• U.S. markets: All three indices finished Friday and the week in the red. Scroll down to the “Overall Market” section to read more.
• Cryptocurrency: Bitcoin’s price managed to hold above the $8,500 level, and even pushed near $9,000 by Sunday early evening hours as the pre-halving rally continued.

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The Energy Sector Is Not Energizing.

Last week started with a few days of over excitement, as investors closed their eyes to the realities of earnings and revenue decline in March. However, by the time a new round of unemployment data was reported on Thursday, and the energy stocks continued to struggle with the oil prices, the market gave up the early excitement and finished the week not too far from where it had started it.

The energy sector is in crisis mode. Year to date, as of Friday, the sector has lost more than 40% of its value. One can argue, the Energy sector is not energizing (lol, Dad joke 😉

To add insult to injury, the feud between the U.S. and China has resumed. This time, it’s about one side accusing the other that Coronavirus pandemic is all its fault.

The Lipstick Effect.

So, what happened?

Shares of L’Oreal (Ticker: LRLCF) were up more than 20% on Friday. One of the world’s largest cosmetics companies announced its quarterly earnings report. While sales in the first quarter of 2020 dropped more than 4%, e-commerce was the star of the show. Online sales are now close to 20% of the company’s revenue and have grown by more than 50%. While the earnings report came out mid-April, the effect on the stock price was delayed until the first day of May, and it’s not even clear whether the price jump is due to the rather good satisfactory performance in Q1. Maybe the so-called red lipstick effect is real for L’Oreal. In tough times, people look for small feel-good moments, and buying a red lipstick qualifies as one.

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Bigger Trouble Than COVID-19.

So, what happened?

Shares of Royal Caribbean Cruises (Ticker: RCL) were down more than 12% on Friday. The company’s stock was already hammered as a result of the COVID-19 pandemic. However, the troubles are nowhere near the end. On Friday, the Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-OR) and Chair of the House Subcommittee on Coast Guard and Maritime Transportation Sean Patrick Maloney (D-NY) sent a letter to the cruise company requesting information about the company’s policies and practices related to the health and safety of its passenger. It seems RCL is in bigger trouble than the COVID-19 pandemic.

Buffett Show

So what happened here?

Every year, the last week of April, the first week of May, a halo of wisdom and excitement takes over the investment world, and this year, things weren’t much different, despite the COVID-19-induced shelter-in-place order.

If you woke up on Saturday, glued to your laptop, pressing refresh on a particular Yahoo! Finance page, you already know what we are talking about. Saturday was the day of the Buffett Show.

What show?

We are talking about Berkshire Hathaway’s (Ticker: BRK.A / BRK.B) annual shareholder meeting that typically occurs in Omaha, and Warren Buffett (CEO), and Charlie Munger (his partner) are the stars. During a full day of remarks, Q&A, and other activities, every year, a flock of die-hard Warren fans gathers in one place to absorb the wisdom of the Oracle of Omaha. This year, however, everything was moved to a live stream event. That’s why a lot of us were glued to our laptops, refreshing Yahoo! Finance until investors’ favorite uncle emerged on the screen.

So what did we learn?

In a 4-hour wisdom-full marathon of a show, Warren Buffett talked about investing, America, COVID-19 and Berkshire’s future. As always, we’ve learned quite a lot. Here are the three most important things we learned with 2020 Buffet Show:

• The recession fears going around in society is a pretty common reaction to a market crash. Throughout history, every time there is a big market movement, everybody asks whether it’s 1929’s recession all over again.
• Because stocks are quoted min-by-min, people assume they should have a new opinion about them min-by-min. If you look at stocks as part-ownership of companies, you can’t form a new opinion every minute.
• The virus’s impact on the stock market could mean a drastic impact on a company’s earnings and revenue. Historical valuation metrics such as price to sales ratio or price to earnings ratio won’t be as effective in estimating the fair share price of a company. Be careful when you conclude that a company is over or undervalued based on valuation information in the last few quarters. Berkshire company’s earnings through the end of the year.

Those were our top three takeaways. Did you watch the show? What are some of your main takeaways? Email us at members@tradestocks.com, and share your thoughts, questions, and ideas.

About the Author

The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card