Day: September 2, 2024

LONDON (Reuters) – Private equity giant Blackstone has agreed to buy an 80% stake in a European warehouse portfolio run by landlord Burstone, the latest push by the U.S. investment manager into warehouses that have boomed alongside the rise of e-commerce.

The Johannesburg-listed company – formerly Investec’s property fund – has agreed to sell the controlling stake in the 1.1 billion euros ($1.2 billion) portfolio with properties in seven countries including Germany, France and the Netherlands to Blackstone, according to a Burstone stock exchange announcement.

Burstone will receive immediate cash proceeds of 250 million euros from the sale, the statement said, adding that the deal would help it fund expansion of the business. Burstone will retain a 20% interest in the portfolio and its European team will continue to manage it.

Blackstone has made a series of investments in European warehouse businesses in recent years including under the brand Mileway, a last-mile logistics company which Blackstone and existing investors recapitalised in 2022.

Logistics including warehouses have been a bright spot in a struggling commercial real estate market, as the boom in e-commerce creates demand for more space.

($1 = 0.9035 euros)

(Reporting by Iain Withers,; Editing by Tommy Reggiori Wilkes and Ed Osmond)

For nearly six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been put on a pedestal by Wall Street — and with good reason.

Since the “Oracle of Omaha,” as Buffett has come to be known, took the reins in the mid-1960s, he’s overseen a greater than 5,710,000% cumulative return in Berkshire’s Class A shares (BRK.A), as of the closing bell on Aug. 29. He’s also practically doubled up the annualized total return, including dividends, of the widely followed S&P 500 over the same span.

Riding Buffett’s coattails has been a winning strategy for long-term-minded investors. Thanks to quarterly filed Form 13Fs — a 13F allows investors an over-the-shoulder look at which stocks Wall Street’s top money managers bought and sold in the most recent quarter — mirroring the trading activity of Berkshire’s brightest minds, which includes Warren Buffett and his two investing “lieutenants,” Todd Combs and Ted Weschler, can be done with ease.

However, the true apple of Buffett’s eye, and the stock that recently hit a milestone just eight other public companies have ever achieved, won’t be found in Berkshire’s quarterly 13Fs.

The Oracle of Omaha has been a selective buyer of late

Despite being an avid proponent of the U.S. economy and American businesses, what Buffett and his team do over short periods doesn’t always mesh with the long-term ethos that Charlie Munger built at Berkshire Hathaway.

Based on both public 13Fs and Berkshire’s quarterly cash flow statements, investors will see that Buffett’s company has been a net-seller of equities for seven consecutive quarters, to the tune of almost $132 billion. With Buffett overseeing the sale of around $5.4 billion worth of Bank of America shares since mid-July, there’s a good chance we’ll witness this net-equity selling activity extend to an eighth quarter.

While Buffett has unwavering faith in the American economy over the long haul, he’s also a value investor at heart. He wants to pay a “fair price” for “wonderful companies,” and he’s willing to sit on his hands and wait until stock valuations make sense.

But this doesn’t mean Buffett’s buying activity has been nonexistent — it’s just very selective.

For instance, he’s been purchasing shares of integrated oil and gas company Occidental Petroleum (NYSE: OXY) with some degree of consistency since the start of 2022. Aside from providing in-demand energy commodities, Occidental is highly levered to its drilling segment. Generating a higher percentage of its revenue from drilling than other integrated operators can allow Occidental to enjoy an outsized operating cash flow benefit if the spot price for crude oil remains elevated.

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During the COVID-19 pandemic, global energy majors were forced to slash their capital expenditures (capex) due to an energy commodity demand cliff and unprecedented uncertainty. Even with capex levels now back to normal, crude oil supply constraints remain, which may help buoy its spot price.

Warren Buffett and his crew have also been buyers of satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI) and Liberty Media’s Sirius XM tracking stock, Liberty Sirius XM Group (NASDAQ: LSXMA)(NASDAQ: LSXMK).

In a little over a week, Sirius XM and Liberty Sirius XM Group will merge to create one class of shares. Sirius XM is also effecting a reverse 1-for-10 stock split upon consummation of the merger to lower its outstanding share count, increase its share price, and hopefully draw more institutional investor interest.

The merger between legal satellite-radio monopoly Sirius XM and Liberty Sirius XM Group has all the hallmarks of a rare arbitrage play from the Oracle of Omaha.

Warren Buffett’s favorite stock to buy just joined exclusive company

But at the end of the day, neither Occidental Petroleum nor Sirius XM are Warren Buffett’s favorite stock to buy. “Favorite stock” is a term reserved for the company the Oracle of Omaha has purchased for 24 consecutive quarters.

As stated earlier, this “favorite stock” isn’t going to be found in quarterly 13Fs. Rather, you’ll need to dig into Berkshire’s Hathaway’s quarterly operating results, which provide to-the-cent buying activity of Warren Buffett’s favorite stock. Near the end of each report, just prior to the executive certifications, you’ll find detailed information on share repurchase activity and come to the realization that the stock Buffett buys more than any other is (drum roll) shares of his own company.

Before mid-July 2018, share buyback activity at Berkshire was nonexistent. The guidelines in place only allowed shares to be repurchased if Berkshire Hathaway’s stock fell to or below 120% of book value, as of the most recent quarter. With shares not falling to or below this line-in-the-sand threshold, Buffett and right-hand man Charlie Munger (who passed away in November 2023) were forced to sit on their hands.

On July 17, 2018, Berkshire’s board amended the criteria governing share repurchases to allow Buffett and Munger to get in the game. Berkshire’s board set no ceiling or end date to buyback activity as long as:

1. The company has at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet; and

2. Buffett believes shares are intrinsically cheap.

Although the second point is entirely subjective, Berkshire sitting on almost $277 billion in cash is a sizable buffer that allows Buffett to regularly repurchase shares of his own company. Over six years, he’s overseen close to $78 billion in buybacks.

It just so happens that Buffett’s favorite stock to buy hit a milestone last week that only eight other companies throughout history have ever achieved. As of the closing bell on Aug. 28, Berkshire became only the ninth public company to end a trading session with a market cap of at least $1 trillion. Seven of these eight exclusive companies are members of the “Magnificent Seven,” while the eighth is oil goliath Saudi Aramco, which isn’t traded on U.S. exchanges.

Because Berkshire doesn’t pay a dividend, leaning on share buybacks is Buffett’s way of rewarding his company’s shareholders. Reducing Berkshire’s outstanding share count by nearly 12.7% over the last six years has steadily increased the ownership stakes of its remaining investors. More importantly, it drives home the importance of long-term investing, which is something Charlie Munger preached in his decades at Berkshire.

Furthermore, companies with steady or growing net income and a declining outstanding share count via buybacks tend to see their earnings per share (EPS) rise. Over time, share repurchases have made Berkshire’s stock more fundamentally attractive to investors.

It can also be argued that overseeing nearly $78 billion in cumulative buybacks in six years is a testament to Warren Buffett’s faith in the company he’s overseen for almost 60 years.

Berkshire owns around five dozen businesses, and the Oracle of Omaha is overseeing a 45-stock, $318 billion investment portfolio that’s predominantly comprised of cyclical businesses. In other words, Buffett and his team have strongly wagered on the U.S. economy and top-tier American businesses expanding over time. It’s a simple numbers game that undeniably favors long-term optimists.

Although Berkshire Hathaway’s $1 trillion market cap is a big number, there’s no reason to believe shares won’t head even higher.

Should you invest $1,000 in Berkshire Hathaway right now?

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America and Sirius XM. The Motley Fool has positions in and recommends Bank of America and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Warren Buffett’s Favorite Stock to Buy Just Hit a Milestone That Only 8 Public Companies Have Ever Achieved was originally published by The Motley Fool

It’s a good idea to buy stocks that have solid upside potential and limited downside. And I think automation technology company Emerson Electric (NYSE: EMR), water products company Pentair (NYSE: PNR), and industrial conglomerate 3M (NYSE: MMM) are ideal candidates in this regard. Here’s why.

Emerson Electric is an outstanding value stock

Management’s decision to focus the company on automation and adjacent markets like industrial software and test and measurement is set to pay off in the coming years. Having recently completed the sale of its remaining 40% interest in its heating, ventilation, air-conditioning, and refrigeration (HVACR) joint venture, Copeland, Emerson Electric is ready to accelerate its growth into its targeted end markets.

Its core business of automation has been mixed in 2024, with process automation (oil and gas, mining, chemicals, etc.) and hybrid (food, life sciences, etc.) growing solidly with mid-single-digit orders growth in the recent third quarter, offset by a low-single-digit decline in orders in discrete (factory automation).

Still, as its peer Rockwell Automation noted, discrete automation is experiencing an inventory correction. Distributors are reducing inventory from previously elevated levels caused by lengthening product lead times during the supply chain crisis. Emerson’s automation performance is expected to improve once the inventory correction is completed and interest rates decrease.

Moreover, its 55% ownership of industrial software company Aspen Technology exposes Emerson to positive spending trends in energy, utilities, and smart grid solutions. Lastly, its acquisition of test and measurement company NI last year looks well-timed. Emerson, and its test and measurement peer Keysight Technologies, is expecting a growth recovery in 2025.

Thinking longer-term, Emerson’s automation solutions are critical to keeping its customers’ operations cost-effective, a crucial concern for plants operated outside low labor-cost countries. Trading at 17.5 times Wall Street earnings estimates for 2025, Emerson Electric stock has plenty of upside potential, while the downside is limited by the fact that its markets are bottoming in 2024.

Pentair is set for sales and margin growth

Pentair is a water products company servicing the industrial, commercial, and residential markets. It is one of the most compelling stocks on the market today. There are three key reasons why:

• Through transformational initiatives, the company aims to increase its operating profit margin from 20.8% in 2023 to 24% in 2026.

• Despite a slowdown in new residential pool construction in 2024, the installed base of pools is still growing and will support growth in maintenance spending on pools in the future.

• A lower interest rate environment should support a recovery in new pool construction.

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As such, Pentair combines underlying growth from company restructuring with the upside potential from a lower interest rate environment.

Both factors are significant. For example, its transformational initiative includes pricing adjustments, improving sourcing relationships to reduce costs, consolidating its manufacturing footprint, and initiating 80/20 focused sales. The latter refers to the principle whereby 20% of customers generate 80% of sales, allowing companies to focus their products, pricing, and marketing strategy on their most profitable customers.

The company can also cut costs by reducing its focus on smaller customers that generate minimal sales. I’ve previously discussed the initiatives for those who want to get into more detail, and valuation matters, too. Like Emerson Electric, Pentair’s end markets look like they are bottoming in 2024. The company is primed for solid growth in 2025, with some upside kicker from a lower interest rate environment.

3M’s recovery starts here

After years of lackluster sales growth and mediocre margin performance, 3M finally has management in place to improve matters. The spinoff of its healthcare business, Solventum, raised cash to support its legal settlements and rid 3M of a company it had invested substantial time, money, and effort without notable achievement.

Moreover, new CEO William Brown is committed to improving the company’s research and development capability to get the company back to producing new products that command market share and pricing power. While that will take time to come to fruition, Brown is also working on a fundamental restructuring to improve its supply chain, leverage its buying power in sourcing, and rationalize its factory and distribution footprint.

As part of his plans, Brown plans to reduce the time 3M holds inventory for sale, resulting in a potential $1 billion improvement in free cash flow — that alone could be worth 28% more on the stock price.

As with Pentair, 3M offers upside from management’s restructuring initiatives and a cyclical improvement in its end markets, which, in 3M’s case, includes semiconductors, automotives, consumer electronics, and construction materials.

Should you invest $1,000 in 3M right now?

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Emerson Electric. The Motley Fool recommends 3M and Solventum. The Motley Fool has a disclosure policy.

3 Great Value Stocks That Are Screaming Buys in September was originally published by The Motley Fool

(Bloomberg) — Global equities hovered near record highs on Monday as investors prepared for what’s typically considered the most challenging month for stocks.

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Europe’s Stoxx 600 index pared most losses from earlier in the session after closing at an all-time high on Friday. Volkswagen AG rose 1.3% after the automaker said it’s considering unprecedented factory closures in Germany, while Rightmove Plc surged 27% in London on the back of takeover interest from Rupert Murdoch’s REA Group Ltd.

US equity futures were little changed. The dollar edged higher after its worst month this year, while cash Treasuries were closed for the US Labor Day holiday. Mexican stocks gained while Brazilian assets retreated.

Historically, September has been a particularly poor month for stocks over the past four years, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September since 2021.

The trend could persist, especially with the upcoming US jobs report on Friday, which will provide crucial insights into how quickly or slowly the Federal Reserve might cut rates and as the US election campaign gets into full swing. Traders are pricing the US easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis-point cut, according to data compiled by Bloomberg.

“I think the market is pretty well versed with what it thinks is going to happen — there will be some kind of cut,” Fiona Boal, global head of equities at S&P Dow Jones Indices, told Bloomberg Television. “As we move through autumn, we will see the VIX move more to thinking about the markets, thinking about political issues.”

JPMorgan Chase & Co. strategists cautioned that the equity market rally could stall even if the Fed initiates a rate cut. Any policy easing would be in response to slowing growth, while the seasonal trend for September would be another impediment, the team led by Mislav Matejka wrote in a note.

“We are not out of the woods yet,” Matejka said, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”

Jobs data potentially pointing to a very gradual cooling down of the US labor market could lead traders to adjust their expectations for rate cuts to the benefit of the dollar, according to to Valentin Marinov, head of G-10 FX strategy at Credit Agricole CIB.

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“The markets may be leaning too dovish into the September Fed meeting,” Marinov told Bloomberg Television. “The dollar could recoup some ground once the markets realized that the Fed will move more cautiously.”

A gauge for Asian stocks retreated on the back of heightened concerns about the health of the economy in China, where a prolonged property market slump is curbing domestic demand.

“I think there’s a huge problem — by now everybody recognizes that,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Ingles and Yvonne Man in an interview. “The government needs to do substantially more.”

In commodities, oil fluctuated between small gains and losses as traders weigh a planned production increase from OPEC+ next month, economic headwinds in China and lower output in Libya.

Key events this week:

• US markets closed for Labor Day holiday, Monday

• South Korea CPI, Tuesday

• Switzerland GDP, CPI, Tuesday

• South Africa GDP, Tuesday

• US construction spending, ISM Manufacturing index, Tuesday

• Mexico unemployment, Tuesday

• Brazil GDP, Tuesday

• Chile rate decision, Tuesday

• Australia GDP, Wednesday

• China Caixin services PMI, Wednesday

• Bloomberg CEO Forum in Jakarta, Wednesday

• Eurozone HCOB services PMI, PPI, Wednesday

• Poland rate decision, Wednesday

• Fed’s Beige Book, Wednesday

• Canada rate decision, Wednesday

• South Korea GDP, Thursday

• Malaysia rate decision, Thursday

• Philippines CPI, Thursday

• Taiwan CPI, Thursday

• Thailand CPI, Thursday

• Eurozone retail sales, Thursday

• Germany factory orders, Thursday

• US initial jobless claims, ADP employment, ISM services index, Thursday

• Eurozone GDP, Friday

• US nonfarm payrolls, Friday

• Canada unemployment, Friday

• Chile CPI, Friday

• Colombia CPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 2:27 p.m. New York time

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI World Index was little changed

• Nasdaq 100 futures rose 0.1% to the highest since Aug. 27

• The MSCI Asia Pacific Index fell 0.4%, more than any closing loss since Aug. 8

• The MSCI Emerging Markets Index fell 0.3%, more than any closing loss since Aug. 27

• S&P/BMV IPC rose 1.1%

• The Ibovespa Index fell 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.2% to $1.1070

• The British pound rose 0.1% to $1.3145

• The Japanese yen weakened 0.5%, falling for the fourth straight day, the longest losing streak since June 21

• The offshore yuan slipped 0.4%, more than any closing loss since Aug. 15

• The Mexican peso fell 0.3% to 19.79

• The Brazilian real weakened 0.2% to 5.6209

Cryptocurrencies

Bonds

• The yield on 10-year Treasuries was little changed at 3.90%

• Germany’s 10-year yield advanced four basis points to 2.34%

• Britain’s 10-year yield advanced four basis points to 4.05%

Commodities

• West Texas Intermediate crude rose 0.7% to $74.04 a barrel

• Spot gold fell 0.2% to $2,499.34 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley, Sagarika Jaisinghani and Sebastian Boyd.

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©2024 Bloomberg L.P.

By Alun John and Karin Strohecker

LONDON (Reuters) – The dollar fell more than 2% against other major currencies in August, marking its biggest monthly drop this year and providing some relief to economies that have suffered under the weight of dollar strength.

The dollar’s downtrend, which has long been anticipated, is driven by expectations that the U.S. Federal Reserve will cut interest rates as the economy weakens.

“The dollar has been under pressure and it will remain under pressure over the remainder of this year,” said Guy Miller, chief market strategist, Zurich Insurance Group.

Here’s where the relief is being felt the most.

1/ YEN INTERVENTION WATCH, CANCELLED

In July, traders braced for Japanese intervention to prop-up a yen that hit 38-year lows against the dollar, a headache for politicians and the Bank of Japan.

But the yen’s dramatic rebound has put an end to such intervention speculation.

One dollar is worth 146 yen, down more than 15 yen or around 10% from its mid-July levels, thanks to a BOJ rate hike, looming Fed cuts and a sharp reversal of popular carry trades.

“We’re not going to get a rebound in U.S. rates like we’ve had in previous corrections in the past two years. This is a fundamental turn and dollar/yen is heading lower,” said Derek Halpenny, MUFG’s head of research global markets EMEA.

It’s too late for Japanese Prime Minister Fumio Kishida however. He soon steps down, and the weak yen, which drove up prices, contributed to his undoing.

2/ NEVER HAPPY?

Earlier this year, China tried to stop its currency from weakening too much against the dollar, partly in fear this would drive capital outflows.

But with the yuan at its strongest since June 2023, authorities now fear further strength could cause disruption.

Its rise is largely due to the dollar weakening – China’s domestic economy is fragile – but it could continue, especially if exporters sell the hoard of dollars they have accumulated.

“We generally expect that external developments will continue to outweigh domestic drags, and the yuan should gradually move stronger,” said ING chief economist for Greater China Lynn Song, forecasting the dollar at 7 yuan by year-end with a fall of around 1% from current levels.

3/ BREATHING SPACE

The weaker dollar has lifted emerging market currencies elsewhere too, especially in Asia. The Philippine peso chalked up its best monthly gains in August in some 18-years and the Indonesian rupiah in more than four years.

That momentum did not spread to Latin America, where Mexico’s peso and much of the region suffered hefty losses on domestic woes and wobbly commodity prices.

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Nonetheless, a softer dollar coupled with U.S. soft landing hopes provide welcome breathing space for some emerging markets, allowing them more room to cut rates and become more sensitive to domestic growth issues.

“Through the remainder of the year we expect central banks in Philippines, Singapore, South Africa, South Korea, Taiwan and Turkey to join their early-cutter peers in LatAm and (central and Eastern Europe),” said MUFG’s head of emerging market research Ehsan Khoman.

4/ FROM FOE TO FRIEND

Two years ago, sterling fell to record lows, partly on political turmoil, while the euro hit parity versus the dollar – moves that exacerbated central banks’ inflation battle.

That’s now changed and currency strength will likely comfort Bank of England and European Central Bank rate-setters looking to ease policy but mindful of sticky inflation in some parts of the economy.

Sterling and the euro are the top performing major currencies this year. Sterling is above $1.30, up over 25% since its record lows and the euro is above $1.10, supported by markets pricing fewer ECB and BoE rate cuts than for the Fed.

5/ CROWNING MOMENT

Sweden’s rate-setters are also likely cheering a weaker dollar.

The Swedish crown has rallied 4% in August, making it the best performing major currency.

It also appreciated versus the euro, helping Sweden to cut rates. Last year Riksbank Governor Eric Thedeen said crown weakness made the inflation fight harder.

It is difficult for Sweden’s crown to strengthen further from here, analysts say, but the Norwegian crown could hold up better.

Norway will likely be among the last developed market economies to cut rates, boosting its currency and its sensitivity to global growth.

“In an environment where U.S. interest rates are coming down, U.S. growth slows, but global growth remains stable, high beta (growth sensitive) currencies such as the NOK (Norwegian crown) tend to perform well,” NatWest analysts said.

(Reporting by Alun John and Karin Strohecker in London, and the Shanghai newsroom; Editing by Dhara Ranasinghe and Jacqueline Wong)

(Bloomberg) — The equity market rally may stall near record highs even if the Federal Reserve starts a highly anticipated rate-cutting cycle, according to JPMorgan Chase & Co. strategists.

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The team led by Mislav Matejka — who has been among the most bearish voices on stocks this year — said that any policy easing would be in response to slowing growth, making it a “reactive” reduction. The seasonal trend is another impediment, with September historically the worst month for US stocks.

“We are not out of the woods yet,” Matejka wrote in a note, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging again in September.”

After slumping in the early days of August, the S&P 500 recovered to end the month within striking distance of a record high on bets that the Fed will start cutting interest rates at its next policy meeting on Sept. 17-18. The MSCI All-Country World Index is at an all-time peak.

The US benchmark has declined 4.2% on average in September in the past five years, according to data compiled by Bloomberg. Traders are also awaiting a raft of economic data, including the all-important jobs report this week, for more clues on the health of the economy.

S&P 500 futures declined 0.4%. The stock market is closed for a holiday on Monday.

Other market strategists including Bank of America Corp.’s Michael Hartnett have recently warned that the Fed’s first rate cut would be a catalyst to sell equities rather than drive another leg higher.

–With assistance from Kit Rees.

(Adds move in US stock futures in sixth paragraph. A previous version corrected the timing of jobs report.)

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©2024 Bloomberg L.P.

Are you considering taking on a new stake in Walmart (NYSE: WMT) but are intimidated by the stock’s recent run-up to record highs? It’s not an unreasonable concern. It’s almost always better to buy good stocks at a discount rather than a premium if you can.

This is one of these cases, however, where waiting for a better price could end up costing you more than it saves. Walmart shares are marching forward because the retailer is firing on all cylinders, and that’s not likely to stop anytime soon.

If you’re wondering specifically why the world’s biggest retailer makes for such a great investment right now, though, here are the top four reasons.

1. Walmart’s sheer size is a distinct competitive advantage

You probably already know Walmart is the world’s biggest brick-and-mortar retailer. What you may not fully appreciate is just how much bigger it is. For perspective, this company operates over 10,600 stores all over the world, with more than half of them located outside of the United States. Its next-nearest competitor is Kroger with its 2,750 locales, while there are just under 2,000 Target stores.

Said another way, as big as e-commerce behemoth Amazon is, in terms of revenue, Walmart is still bigger.

Size isn’t necessarily everything, of course. After all, big companies can be run badly too! Walmart is run very, very well, however, using its size and subsequent spending power to keep competitors in check by doing things those competitors simply can’t afford to do.

2. The retailer’s revenue “ecosystem” approach is working

You’re likely familiar with the term “omnichannel,” but if not, it’s just a term used to describe how retailers meld their online and in-store shopping environment into a seamless experience for consumers. It’s a phrase, however, that no longer accurately describes how smarter retailers like Walmart engage with shoppers. Increasingly, the industry creating new ways for consumers to purchase goods without even thinking about it; shopping with a particular store chain simply becomes part of a lifestyle.

Yes, Walmart’s subscription-based Walmart+ program is an example of this lifestyle ecosystem. Although the company didn’t cite a specific headcount, it did report double-digit percentage growth in the number of paying members, leading to 14.4% year-over-year growth in its membership income. And, given that Walmart+ members enjoy free shipping and delivery, it makes sense that last quarter’s 22% year-over-year growth in e-commerce revenue was largely driven by this convenience-seeking crowd.

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It’s not just a matter of offering more convenience, though. Walmart monetizes its ecosystem in other ways, too. For instance, the company now allows its vendors and suppliers to pay to promote their goods being sold via Walmart.com. This advertising business’s high-margin revenue was up 26% year over year last quarter and higher by 30% in the United States. The retailer also recently launched an effort to acquire television brand Vizio, which presents another platform from which to directly engage with — and advertise to — consumers. As of the most recent count, Vizio reported over 18 million active accounts/users of its television. It’s going to be interesting to see all the different ways Walmart will wind up engaging with them.

Its enormous brick-and-mortar presence, of course, bolsters the usage of its online and out-of-store offerings.

3. Walmart is (finally) appealing to upper-income households

Prior to the COVID-19 pandemic, affluent households weren’t exactly regular Walmart shoppers. Then, practicality set in. Once inflation began soaring in 2021, even households earning in excess of $100,000 per year were forced to start thinking about their budgets. Not only was Walmart more likely to offer what these consumers needed, it was more likely to offer it at a better price. For the next couple of years, the retailer regularly touted market share gains among this demographic.

Inflation is finally abating, however, leaving investors wondering if these newly won customers will continue shopping with the discounter.

Some won’t, to be sure. But, given all that Walmart is doing to keep this crowd around, many of them likely will.

Take the company’s overhaul of the in-store presentation of some of its apparel lines as an example. For decades its sales floors looked more like warehouses than a department store. Not anymore though. Seasonal and theme-based visual presentations (dressed mannequins, entire room setups on risers, branding backdrops, etc.) are now the norm, nodding back to traditional department stores’ glory days by featuring in-demand brands and goods.

It’s not just more compelling in-store presentations either. The retailer is adding higher-end brands to the mix as well. Reebok and Chaps are both recent premium additions to the chain’s apparel lines, for instance. Premium wines are another once-unlikely addition to its store shelves that appeal to the higher-end crowd.

4. Walmart is resilient regardless of the economic backdrop

Walmart’s business is well protected no matter what sort of economic environment we’re in. Granted, that’s largely because over half of its revenue is grocery-related. People must eat regardless of the cost of doing so, after all.

Even taking the must-have nature of the majority of Walmart’s revenue out of the discussion, though, the retailer can still hold up to challenges. More than 10% of its top line comes from health and wellness products, and while roughly 25% of its sales comes from general merchandise that in theory could be economically sensitive, consumers will always need basics likes socks, office supplies, towels, kids’ clothes, light bulbs, and the like. No other retailer is beating Walmart’s prices on such items.

Or, think about it like this. Not once since 2017 has Walmart failed to produce quarterly revenue that was better than the year-ago comparison. That includes in late 2021 and early 2022 when the world was easing out of the pandemic which generated incredibly strong sales growth for the company just a year earlier.

Just keep it all in perspective

To be clear, investors shouldn’t expect too much. Walmart will never be a high-growth stock like, say, Nvidia or Alphabet. Last quarter’s top-line growth of just under 5% is in line with the company’s likely long-term norm. There’s only so much money consumers are willing and able to spend no matter how strong or weak the economy is, just as there are only so many places Walmart can profitably establish a store.

On the flipside, don’t talk yourself out of a solid investment simply because Walmart stock is up as much as it is right now, or because the company itself lacks pizzazz. You don’t invest for excitement. You invest for plausible growth. To the extent every portfolio needs some stability and predictability, this name offers plenty of both, and will likely continue doing so well into the future.

Should you invest $1,000 in Walmart right now?

Before you buy stock in Walmart, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Walmart wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

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*Stock Advisor returns as of August 26, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Nvidia, Target, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.

4 Reasons to Buy Walmart Stock Like There’s No Tomorrow was originally published by The Motley Fool

Billionaire stock portfolios can unearth top investment ideas. Most billionaire investors, after all, have superb track records when picking equities.

Point72, a global asset manager led by billionaire Steven A. Cohen, has been steadily buying shares of gallium nitride (GaN) power integrated circuit specialist Navitas Semiconductor Company (NASDAQ: NVTS) since the first quarter of 2023.

After adding another 4.12 million shares in the second quarter of 2024, Point72 now owns a 2.34% stake in the next-generation semiconductor company. This investment is intriguing for several reasons.

First, Navitas shares trade at a mere $3.02 per share, a price point that typically keeps professional investors on the sidelines. Next, the semiconductor company isn’t in the best financial shape either. More on that in a moment.

Yet Cohen’s aggressive buying over the past year and a half warrants attention by investors on the hunt for the next big growth play. Let’s dig deeper to better understand Navitas’ core value proposition and risk profile.

Navitas: A next-generation semiconductor player

Navitas designs, develops, and markets gallium nitride power integrated circuits, silicon carbide, and associated components used in power conversion and charging. Its products find applications in mobile devices, consumer electronics, data centers, solar inverters, and electric vehicles (EVs). The company operates globally, with its principal executive offices in Torrance, California.

Founded in 2013, Navitas is pioneering the GaN market with a proprietary GaN power IC platform shipping in mass production to tier-1 companies like Samsung, Dell, Lenovo, and Amazon. The company’s solutions offer faster charging, higher power density, and greater energy savings compared to silicon-based power systems.

Core strengths and market opportunities

Navitas’ core strength lies in its industry-leading IP position, including a comprehensive patent portfolio and proprietary process design kit (PDK). The company’s research and development activities, primarily located in the U.S. and China, consumed approximately 90% of its revenue in the first half of 2024.

The company is targeting several high-growth markets. In the Enterprise/AI Data Center segment, Navitas is developing AC-DC power platforms up to 10 kW to meet Nvidia‘s demanding Hopper-Blackwell-Rubin roadmap. The EV/eMobility division is seeing strong growth in its customer pipeline, with over 200 projects in development.

The Appliance/Industrial segment is poised for a revenue ramp in 2025 across diverse applications. In the Solar/Energy Storage market, Navitas is displacing legacy silicon chips with both SiC and GaN technologies, according to its latest 10-Q.

Story continues

The gallium nitride market: Heating up for future demand

The power gallium nitride device market is projected to grow significantly in the coming years. This market is set to expand from $126 million in 2021 to $2 billion in 2027, representing a compound annual growth rate of 59%, according to market research firm Yole Développement. This parabolic growth is primarily driven by increasing demand in consumer electronics, data centers, and electric vehicles.

However, the robotics revolution could serve as a future catalyst for even more explosive growth in the GaN market. Artificial intelligence (AI) is expected to power advanced robotics from 2025 to 2035, potentially unlocking trillions in economic value. While this isn’t the primary driver of current GaN market growth, it represents a significant future opportunity that could sustain and potentially accelerate the market’s expansion.

Navitas’ technology could play a crucial role in addressing the power consumption challenges that currently hold back the robotics field. As robots become more integrated into daily life, they will require access to rapid recharging systems that can meet their enormous power requirements. Navitas appears to have intellectual property rights to technology that could address this critical need, positioning the company to potentially capitalize on this future demand.

Financial challenges and risks

However, Navitas faces significant financial challenges. As of June 30, 2024, the company had $112.0 million in cash and cash equivalents. Its GAAP loss from operations for the most recent quarter was $31.1 million. Over the past five years, Navitas’ number of outstanding shares has also increased substantially due to dilution, while its share price has declined sharply.

NVTS data by YCharts

Barring a sudden revenue uptick, possibly from its data center business, this trend may continue. While sales are growing by double-digits, Navitas is only expected to generate around $148 million in revenue in 2025, according to Wall Street’s most optimistic forecast. The company is also projected to remain cash flow negative next year, potentially straining its remaining cash reserves.

Is this speculative AI stock a buy?

Steven Cohen’s hedge fund seems to be positioning itself ahead of a potential shift in the semiconductor industry from traditional silicon-based chips to GaN semiconductors. Navitas, as a leader in this niche, could benefit enormously from this trend. Its shares also offer exposure to the coming robotics revolution.

However, investors should carefully weigh the company’s growth potential against its financial risks before following in Cohen’s footsteps. Navitas is far from a slam dunk and serious challenges lie in its path to success.

What’s the bottom line? This AI stock screens as a potential buy for aggressive investors with a high tolerance for risk. That being said, Navitas probably shouldn’t account for more than 1% of your stock portfolio at this early juncture, and investors will want to keep a close eye on the company’s progress.

Should you invest $1,000 in Navitas Semiconductor right now?

Before you buy stock in Navitas Semiconductor, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Navitas Semiconductor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

A Billionaire-Led Hedge Fund Is Gobbling Up This Speculative Artificial Intelligence Stock. Should You? was originally published by The Motley Fool