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Making sense of the markets this week: August 14


However, it’s worth noting that while $6.2 billion is a decent chunk of change for any company, it still represents a less greedy Buffett than in the first Quarter, when Buffett really put Berkshire’s cash to good use by purchasing shares worth $51.1 billion. Purchases included: Citigroup, Paramount Global, Ally Financial, Chevron, Occidental Petroleum, HP and Activision Blizzard.

While the fact that Berkshire booked a $53-billion loss from the depreciation of shares within its broad portfolio of companies got most of the attention, Berkshire was quick to point out that its operating income (how its underlying companies actually did, as opposed to simple stock pricing) rose by 39% year over year to $9.3 billion.

While Berkshire’s stock hasn’t exactly set fire this year, the company’s value investing-based approach held up pretty well relative to the rest of the S&P 500.

In terms of broad takeaways, the slowdown in Buffett’s spending slightly concerns me. Given that Berkshire still has more than $100 billion in cash on its balance sheet, I would’ve hoped it would be more confident in finding more opportunities to make excellent long-term investments. Clearly, the mixed economic picture is affecting investors’ decision making at this point.

Meanwhile, Disney’s (DIS/NYSE) earnings report last Wednesday was all positive. Earnings per share came in at $1.09 (versus a predicted $0.96), while both revenues and the all-important Disney+ subscriptions came in well ahead of analyst expectations as well. With the surge in post-lockdowns “revenge travel,” it’s no mystery why the parks, experiences and products divisions saw revenues increase 72% year over year. Disney shares rose 6% as investors processed the upbeat news.

Canadian investors looking to get portfolio exposure to Disney and Berkshire can do so through CDRs on the Neo exchange.

Bausch suffers from IBS—that’s Irritable Balance Sheet

Because Canada’s healthcare sector is so small comparatively speaking, when one of our few large companies sees a year-to-date drawdown of more than 80%, it’s pretty big news.

The massive hit was due to a court decision involving Bausch’s (BHC/TSX) patent for the drug Xifaxan. This drug is used to treat irritable bowel syndrome (IBS), and because Bausch was set to have exclusive rights of production until 2029, substantial profit margins were baked into the company’s current valuation. 


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