Without Buffett, Berkshire is FINALLY Going All-In on AI!

Hey, welcome back subscribers. My name is Ali. This is my world of stocks and welcome back to our big stock buyer series where every weekend uh we take a close look at the latest SEC filings to see exactly where the biggest investors on Wall Street are putting their or parking their money. Basically, where where are they investing? And today's episode is going to be a very interesting one because we're going to dig into the world's largest conglomerate in Berkshire Hathway. see which stocks they've been buying post the Warren Buffett era. And it just so happens that this latest quarter without Buffett at the helm, they poured over $17 billion into just five stocks alone. They actually bought literally exactly five stocks last quarter. Poured over 17 billion into them. So, um, let's quickly break down every single one of those purchases. And I'll be sharing my own opinion on each one of them, too. And as always, I'll even rank them from best to worst, too, based on that opinion. It's always a ton of fun to do that. Um, just do me a quick favor though before we start. If you are enjoying the channel, could you please help me out just by hitting the like and the buttons down below? That really helps keep my channel alive. It means a lot to me. And make sure you're subscribed if you haven't already. I really appreciate that, too. So, thank you for that support, my friends. But hey, with all that said, let's just go ahead and jump straight into these giant purchases. All right. All right. Now, kicking things off here, we actually have a very surprising, gigantic, enormous move here from the Bergkshire team. And that was in Google, ticker symbol GG and G OG L, which Bergkshire poured over $16 billion into, increasing their stake by a shocking more than 650% specifically for the GOGL ticker. Now, the reason I say that this uh enormous move here was so surprising is that, you know, historically when Warren Buffett was calling all the shots, Bergkshire was really known for parking most of their cash in what I always considered to be, you know, fairly boring kind of low growth companies, profitable ones, mind you, uh but you know, fairly low growth things like railroads, you know, big banks, oil companies, insurance companies, stuff that, you know, doesn't really have to do much with high-flying tech. And even when Buffett finally started going heavily into some tech like Apple for example, uh even that I felt like was one of the more conservative options among big tech. But for Berkshire to now be making Google their actually third largest holding when you combine the two tickers. Um and with even Apple at the top, I mean you've got two giant tech plays there that have huge exposure to AI2 by the way. Um that is a very big departure from the old guard status. And to be honest, I kind of love it here for Birkshire. I mean, even if we just look at AI specifically, Google has been really transforming themselves from being something that, you know, everyone was fearing that AI would actually disrupt their entire business to now they're really building an entire end toend ecosystem where their fingerprints are on practically every stage of the AI boom. For example, in hardware, while everyone else is fighting over chip supplies and paying top dollar for Nvidia GPUs, oh, Google actually spent years quietly developing their own custom AI silicon called tensor processing units or TPUs or working right alongside Broadcom for they also developed their own flagship AI model called Gemini and embedded it directly into their digital real estate like Google search, Android, YouTube, Gmail, and more. with the standalone Gemini app, too. By the way, um it recently crossed a billion monthly users. And just as important to all of that is in how they've turned Google Cloud into an absolute cashg generating monster, too, by acting as the landlord for the AI buildout, where aspiring AI companies that, you know, can't afford perhaps the billions of dollars required to build their own data centers. Well, they can now just simply rent out computing power and TPU access directly from Google on a recurring usage basis. And the result of all this is that their financials are exploding through the roof. In fact, Google Cloud is growing faster than almost any of its mega cap rivals with last quarter alone seeing revenue soar by over 80% year-over-year to nearly $25 billion. And as they scale, their profitability is rising too with cloud operating margins, for example, expanding from around 20% all the way up to 36% last quarter on top of a backlog that even topped over half a trillion. And for the company as a whole, sales are nearing 3/4 of a trillion now on an annual basis with unbel unbelievable net income uh that recently broke the $200 billion mark, too. I get that the stock is up a lot and that, you know, capex spending is through the roof, which is, you know, spooking some investors, but hey, with a PEG ratio that is technically still lower than the sector, this is a stock that I think everyone should probably hold in their portfolio for the long term. So, yeah, I'm going to rank it pretty high for now at number two on our list. Okay, moving on to the next purchase. We actually have a stock that I used to own myself too right around the start of the pandemic kind of time frame, but I no longer hold it in my portfolio, but that is Delta Airlines, ticker symbol DAL, which Berkshire just poured roughly a billion dollars into, increasing their stake by a pretty large 44% in the quarter. Now, this one too actually surprised me a bit because well, this is actually an industry that when Buffett was around, you know, you might remember he had given up almost entirely on it. In fact, you might recall around the spring of 2020 during the pandemic crash. Buffett notorious notoriously dumped every single airline stock that Bergkshire held. I remember reporting on it, too. It was like a big shock to the market. They took a brutal paper net loss on it and they called the overall investment just a total mistake for them. Which my experience was actually a little similar too. I ended up selling um some of the stock. I did sell at more opportune times. So I think even a couple times I even made some profit on it. But regardless, um it was in a bit of a similar fashion where I just really hated the fact that I something I had not realized that the pandemic kind of woke me up to was that, you know, government regulation and control was so easy to enact on this specific sector and they were able to cause airlines airliners to to crash so easily. So, I just kind of left the whole industry there um because I felt like it just wasn't a very like, you know, long-term kind of safe play and I haven't really gone back to it ever since. However, fast forward to today and you know, Berkshire's new CEO, Greg um Abble, he's been aggressively reversing that call. Uh stepping in and buying right back into it. In fact, I think they alone hold like close to 10% of the entire company now in in uh Delta. And to be honest, it's actually looking like not that bad of a move by them as Delta is finally showing some real promise again with rising cash flow and a dirt cheap valuation still. This coming from a structural change to their business model called premiumization where instead of getting into bidding wars to sell cheap economy seats, a Delta has completely repositioned itself to target higher margin affluent travelers that pay more for premium cabins, loyalty perks, and co-branded credit cards. In fact, traditional main cabin economy seats accounted for just less than 35% of their total operating revenue last quarter, while their loyalty ecosystem has become really their main profit engine. Their credit card with AMX, for example, already brought in $2.4 billion last quarter and was up 16% year-over-year. A business travel is also picking back up with corporate sales jumping double digits across aerospace, automotive, and banking. And looking ahead, analysts project both their sales and profits to rise by billions in the coming years. The result is that even though the stock has already recovered greatly post pandemic, the valuation is actually still incredibly cheap from an earnings perspective where they even trade around 50% lower than the sector median. That's still nowhere near as good as something like Google, but as time passes, it does look to be returning a bit to its former glory, I would say. And for that, I will put them just under Google on our rankings at number three. All right. Now, moving on to um the next purchase here. This is purchase. This is our third purchase here on the list. Well, here we do actually have a stock that I think um you know, typical Buffett would be I don't know what the right word is. Maybe stubborn enough to to be investing in. You'll see what I mean here, but that stock is Macy's, ticker symbol M, which Berkshire just deployed over $90 million into uh to increase their position by a whopping 142% in the quarter. This to me though does scream like a typical Buffett type of stock. One that is, you know, incredibly cheap on paper, uh, but carries a very boring business in a part of the sector that I feel is mostly being left for dead and physical shopping mall retail. Now, what's funny though is that I actually swing traded Macy's for a little while when I was a little younger and um, I even made a nice little profit on it, too. But I would never consider this a long-term investment worthy type of stock. is I just see online shopping, particularly from Amazon, being far too big of an existential threat. So, I just invest very heavily into Amazon instead. But like I said, I can see why Bergkshire would be enticed by a value play like this as the stock is down close to 40% in the past decade and over 35% lower than the sector tra I'm sorry, it's trading o over 35% lower than the sector on a forward P basis. And for what it's worth, uh, management is at least trying to turn things around with a new strategy that they call a bold new chapter where the plan is to basically like aggressively trim the fat on the business by closing 150 unproductive locations while simultaneously remodeling 350 of their stronger stores to improve the customer experience. And they're also leaning more heavily into their high-end luxury brands that they believe will produce better margins for them. Plus, Macy's, by the way, some people don't know this, but they actually own a ton of their physical real estate, and that some of that could be worth billions of dollars. As a whole, it might even be worth in their entire market cap based on some estimates. Um, but I just think that these aren't compelling enough reasons to invest in the business long-term, the business itself long term, like to say that they're really going to turn things around and be a thriving business. Um, you're really still ignoring here the gigantic elephant in the room of Amazon. And while that monstrous beast is sitting right in front of you, you're just not likely to ever get around it. In fact, analysts project declining sales and profits in the coming years for Macy's. And for me, it just makes it almost untouchable. I am rooting for them just cuz I love going to physical shopping malls myself. I really miss that kind of nostalgic experience. So, I try to go once in a while. Um, but the fact is that physical retail is almost kind of an uninvestable space these days in my opinion. and I just really stick with Amazon when it comes to retail. Um, so I am going to place them in last place on our rankings for now. All right. Now, moving over to uh purchase, where we at here? Purchase number four. We have another classic value play in a sector that's been getting absolutely decimated by macro headwinds over the past few years. And that is Leonard, ticker symbol LN, which Berkshire just dropped over $270 million into increasing their stake by around 30% in the quarter. Now, as for the stock itself, it's been a bit of a disaster lately, which we know Bergkshire tends to, you know, like they kind of like to swoop in on bigger dips when a stock is falling hard. But, you know, so far, LEN has lost over 50% of its entire value from the top as higher rates have made home buying much more expensive, which is killing off, you know, some of that demand, especially for um first-time buyers that are already struggling with inflation and probably waiting for conditions to start easing up. As a result, Leonard has um had to resort to lowering their prices even all the way back to I think it was like 2017 levels, which is causing their sales and profits to shrink, you know, these past couple years before analysts project a rebound around 2027 around 2028. Well, for those looking to grab the second largest home builder in the nation at a now much lower price, this might actually be a good opportunity for you to to do so. And you even get to collect a nice little dividend while you wait for that turnaround to take shape, too. But for me, the business is a little boring. You know, it's definitely very rate sensitive, and I'm just more interested in other stocks instead right now. So, I don't plan to buy uh the stock myself, at least not at this time. But um it is still much better than Macy's, who I don't really see, you know, much of a long-term future for. So, I'm going to bump Google and Delta up one spot to put Leonard right in the middle there at number three. All right, guys. That's going to leave us now, though, with the final purchase of the list. And here it's going to be a little similar of a situation to Macy's where we have another kind of legacy play legacy player um but one that's actually growing at some pretty good rates if you can believe it. That is in the New York Times ticker symbol NYT which Berkshire just added another $43 million to increasing their position by I think this was only around 4% of an increase in the quarter. It was the smallest uh increase there. Now, it's no secret that, you know, print media has been getting absolutely crushed for the better part of I I'd say really all the 2000s, I guess. But surprisingly, the New York Times has actually managed to kind of buck that trend largely through a big digital push and transformation where they aren't just selling the daily news anymore, but rather have expanded their digital offerings into lifestyle categories that keep readers, I guess, a bit hooked on on a daily basis to them. Uh, this includes things like NT cooking, daily games to play, um, The Athletic for heavy sports coverage, and even Wire Cutter for product reviews. They're also pushing heavily into video journalism and podcasts to kind of help capture some of that multimedia audience as well. And to give credit where it's due, their financial results have actually been fairly impressive with analysts uh, even expecting more singledigit gains in the coming years. But for me, I just don't see much to look forward to. I guess longer term than that because even with the successful pivot to digital so far, I still feel that there is way too much established competition online already that is fighting you know very aggressively for viewers attention where but you know whether you're competing against Tik Tok, YouTube X, Instagram and just endless like free news aggregators too that I always just see like everywhere online. Plus, this is more on the um I guess speculation side of things or anecdotal, I guess, but I really I'm I'm kind of guessing here, but I I feel like most NT subscribers must be older in age because um I've literally never met a single person that is subscribed in any way to New York Times or that even mentions using any of their apps or services or anything else. And every time that I've tried to click on something myself from New York Times, it's usually behind a payw wall that would, you know, could end up actually costing hundreds of dollars per year if you look at what it would cost long term, which I would never in a million years ever pay for. I can get that information elsewhere. And with the stock already as high as it is and trading over 73% more expensive than the sector, uh, I feel that it is way too high here. I'm actually going to rank this one even lower than Macy's. Um because I just think that it's a very bad deal at that price. But hey, that's just me. What do you guys think about all of these yourselves? Uh do you own any of these stocks? Do you agree with my opinions on them? Do you agree with my rankings? Would you make any changes to my rankings? I would love to hear your perspective on all of that down below in the comment section. But hey, either way, I just thank you guys for stopping by. Thank you for all of your support. And hey, if you want to go above and beyond, um, you know, you can always, um, support me on Patreon. Uh, join our community Discord. It's always a ton of fun there. I post a daily stock purchase every single day there as well. But, uh, yeah, either way, I just hope that you guys enjoyed the video. Thank you so much for stopping by. I hope you're all doing well, and I will catch you guys in the next one. All right, take care everybody. Bye-bye.