Happy Sunday, everyone.
You think your $20K emergency fund is big? Think again.
Below is a graph illustrating Warren Buffett’s Berkshire Hathaway’s (BRK) $189B cash pile. I want you to read that again — $189 billion dollars in cash. Billion with a B.
When asked why he doesn’t invest / deploy the money, Warren said this:
“I don’t think anyone at this table has any idea of how to use it [$189B in cash] effectively, and therefore we don’t use it.
We only swing at pitches we like… today things aren’t attractive.
I don’t mind at all, given current conditions, building our cash position. When I look at the equity markets and the composition of what’s going on in the world, we find cash quite attractive.”
Portfolio Updates:
I don’t have any updates to share regarding the portfolio. However, I plan to deploy $20K during the month of May toward the portfolio — and I’m excited to begin purchasing new stock ideas.
Most of those ideas have been shared between this post and this post over the last few weeks. As always, I never purchase new stock ideas before telling you all first.
Stay tuned!
Week in Review — Too Long, Didn’t Read:
Amazon delivers $99B in operating cash flow, Apple authorizes a $110B share buyback program, Wall Street doesn’t know what to do with Coinbase stock, Starbucks has a PR disaster, Boeing is getting accused of killing people, Carvana rips higher, a breakdown of the jobs report, and the Fed’s not happy at all about inflation.
Key Earnings Announcements:
Amazon delivers $99B in operating cash flow, Apple authorizes a $110B share buyback program, and Wall Street doesn’t know what to do with Coinbase stock.
Amazon (AMZN)
Key Metrics
Revenue: $143.3 billion, an increase of +13% YoY
Operating Income: $13.0 billion, an increase of +215% YoY
Profits: $10.4 billion, an increase of +228% YoY
Earnings Release Callout
“It was a good start to the year across the business, and you can see that in both our customer experience improvements and financial results. The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate (now at a $100 billion annual revenue run rate).”
My Takeaway
Another incredible quarter by one of the largest holdings in my portfolio. Amazon’s stock price, as you all might remember, trades alongside cash flow — both free cash flow and operating cash flow. If the company is able to generate cash flow growth, history tells us their stock price will follow.
Their operating cash flow increased +82% during the trailing 12 months ($99.1 billion), compared to only $54.3 billion the previous year. Their free cash improved to an inflow of $50.1 billion during their trailing 12 months, compared to an outflow of -$3.3 billion during the previous year.
We saw this coming. We’ve been talking about how excited we are for Amazon for what seems like forever now — I even posted this TikTok video about them 9-months ago. Their stock price is up +40% since posting that, while the S&P 500 is up only +13%.
So what about the next 12 months? For starters, management guided to $10-14B in operating income during Q2 — this was +10% higher than Wall Street’s expectations at the mid-point. Amazon has now reported operating income above the high end of its guidance range for five consecutive quarters — a very good sign.
I also believe the company has many drivers going forward to help expand their operating margins — continued cost efficiencies within its fulfillment network, as well as the ongoing mix shift toward their higher-margin AWS (+17%) and advertising (+24%) business segments.
I’m buying as much of this stock as I can get my hands on! Their stock price is up +23% YTD and +81% over the last 12-months. I don’t think this is going to slow down anytime soon.
Apple (AAPL)
Key Metrics
Revenue: $94.8 billion, an increase of +4.5% YoY
Operating Income: $28.3 billion, an increase of +1% YoY
Profits: $24.2 billion, an increase of +2% YoY
Earnings Release Callout
“Given our confidence in Apple’s future and the value we see in our stock, our Board has authorized an additional $110 billion for share repurchases. We are also raising our quarterly dividend for the twelfth year in a row.”
My Takeaway