Market News

Buffett's Berkshire: The Beacon Amid Market Tumult

Warren Buffett's Berkshire Hathaway is making headlines with its impressive 17% year-to-date return, contrasting sharply with the S&P 500's 6% decline. This stellar performance places Berkshire in the top 10% of large-cap U.S. market leaders, drawing increased attention ahead of its annual shareholder meeting in Omaha, Nebraska. Notably, the newly launched VistaShares Target 15 Berkshire Select Income ETF (OMAH) is leveraging this momentum, featuring Berkshire as its largest holding at 10.6% of the fund. The ETF also includes heavyweight stocks from Berkshire's portfolio, such as Apple, American Express, Kroger, and Coca-Cola, underscoring its strategic alignment with Buffett's investment philosophy.

Berkshire's consistent outperformance is not confined to 2025; it has tripled the S&P 500's returns over the past year and delivered a 185% return over the last five years. This success is partly attributed to Buffett's strategic cash holdings and stock trimming, notably in Apple, which has proven advantageous amidst market volatility. As market dynamics shift from momentum-driven to quality-focused, Berkshire Hathaway's robust track record becomes increasingly appealing. Despite Berkshire's lack of dividends, Buffett reassures shareholders of value creation through reinvestment, a stance he reinforced in his February letter. Meanwhile, the VistaShares ETF entices investors seeking income, promising a 15% annual return through call options and monthly 1.25% payouts. This strategy reflects a broader trend in the ETF space, as investors navigate volatile markets with income-driven approaches.

Turbulence in the Skies: Airlines Grapple with Economic Uncertainty

Airlines are facing a rocky outlook as economic uncertainty dampens domestic travel demand, prompting CEOs to issue warnings on Wall Street. During recent earnings calls, leaders from Delta, Southwest, Alaska Airlines, and American Airlines highlighted factors such as volatile markets and the unpredictability of President Donald Trump's tariff policies as key reasons for this shift. American Airlines CEO Robert Isom noted that uncertainty is causing travelers to rethink spending on vacations. As a result, airlines, anticipating a strong travel season, now find themselves with excess capacity. To address this, companies like Delta and United Airlines have announced plans to scale back capacity growth after the summer, with several carriers retracting their 2025 financial forecasts due to the murky economic outlook.

This cautious approach has led to a drop in airfare prices, with a 5.3% decrease in March compared to last year, according to the Bureau of Labor Statistics. Compounding the issue is a slowdown in corporate travel growth, once a steady revenue stream for airlines. Although Delta CEO Ed Bastian reported a 10% rise in corporate travel at the beginning of the year, that trend has since leveled off. Economic pressures are also affecting government travel, which has declined following cost-cutting measures by the Trump administration. Alaska Airlines CFO Shane Tackett mentioned that while overall demand remains high, it is below the anticipated peak, necessitating fare reductions to fill seats. Despite these challenges, the demand for premium seating and international travel remains robust, offering a glimmer of hope for airlines in this uncertain economic climate.

Apple's India Ambitions Face Harsh Reality Check Amidst Tariff Troubles

Leading analyst Craig Moffett of MoffettNathanson has cast doubt on Apple's plans to shift iPhone assembly from China to India, claiming the strategy may not effectively mitigate tariff-related costs. His skepticism follows a Financial Times report indicating Apple's intent to pivot production to India by the end of next year. In a memo to clients, Moffett argues that while moving assembly to India could marginally ease tariff burdens, it fails to address the core issue: vital iPhone components are still manufactured in China. Speaking on CNBC's "Fast Money," Moffett emphasized the complexities of diversifying Apple's supply chain, stating, "You have a tremendous menu of problems created by tariffs, and moving to India doesn't solve all the problems."

Moffett also highlighted broader challenges facing Apple, notably in the context of a global trade war impacting both costs and sales. He revised his Apple price target from $184 to $141 per share, marking a significant 33% reduction and the lowest on Wall Street, according to FactSet. Despite maintaining a "sell" rating since January 7, with Apple's shares down about 14% since, Moffett clarified his stance is driven by valuation concerns rather than a lack of confidence in Apple's fundamentals. He noted that U.S. carriers like AT&T, Verizon, and T-Mobile have declined to absorb the tariff costs, likely leading to higher consumer prices, longer device holding periods, and slower upgrade cycles. Furthermore, Moffett warned about potential backlash in China, where local competitors like Huawei and Vivo are gaining ground due to the U.S.-China trade tensions. The insights come as Apple prepares to announce its quarterly earnings, with the recent stock uptick preceding potentially volatile market reactions.

Gen Z Trades College Lecture Halls for Blue Collar Opportunities Amid Rising Costs

As the cost of attending college continues to rise significantly, many members of Generation Z are choosing to bypass traditional degrees and enter skilled trades, according to CNBC Make It. Since 2011, the annual cost of attending a four-year, in-state public college has increased by approximately 30%, while private colleges have seen a 42% hike, prompting a shift in career paths. Nich Tremper from Gusto reports that there are two million fewer students in traditional four-year universities than in 2011, with many opting for careers in construction, plumbing, and other trades. In 2024, Gen Z comprised 18% of the overall workforce but accounted for nearly 25% of new hires in skilled trade industries, highlighting a significant trend in employment shifts.

The stories of individuals like Morgan Bradbury and Chase Gallagher illustrate the appeal of entering the trades. Bradbury, who pursued welding after high school, secured a job at BAE Systems with a starting salary of about $57,000 annually. Similarly, Gallagher's landscaping business brought in over $1 million in sales in 2024, providing him with substantial income without a college degree. Despite the relatively high wages in the skilled trades, which average around $23 per hour, college graduates still tend to earn more, with a median salary of $80,000 in 2024. However, emerging challenges include potential impacts from President Trump's latest tariffs, such as a 14.54% tariff on Canadian soft lumber, which could affect the demand for construction jobs. Nonetheless, job security in trades remains stronger than in many white-collar sectors, and with Baby Boomers retiring, Gen Z could find more opportunities to advance and drive economic dynamism.

Degrees of Disparity: The Earnings Gap Between Liberal Arts and STEM Careers

A recent analysis by the Federal Reserve Bank of New York reveals a stark earnings disparity between graduates of liberal arts majors and those in STEM fields, with significant implications for career planning. According to the analysis, which uses 2023 data, graduates with degrees in education, social work, and the arts earn some of the lowest median incomes within five years of graduation, often falling below the U.S. median wage of $48,060. In contrast, engineering majors often start their careers earning upwards of $80,000. The study highlights the economic challenges faced by graduates in liberal arts fields as they generally enter lower-paying sectors like education and public service, in contrast to the high demand for technical skills in industries such as technology and finance.

The analysis also tracks mid-career earnings, where the gap continues to widen. Early childhood education majors earn a median income of $49,000 between ages 35 and 45, only slightly more than their starting salaries, while engineering majors often see their incomes soar into six figures by mid-career. The data underscores the importance of considering potential earnings when choosing a major, especially given the significant financial investment of a college education. For those looking to transition to higher-paying careers, resources like CNBC's new online course offer strategies for career change, emphasizing networking, resume building, and confidence. As economic landscapes evolve, such insights and resources are invaluable for navigating career choices and maximizing long-term financial success.

Editor’s Chart of the Day

Major Earnings

PayPal Holdings, Inc. (PYPL) - April 29, Before Market Open

• Financial Trends: In Q4 2024, PayPal reported a 7% revenue increase to $32 billion, with non-GAAP EPS up 21% year-over-year, and total payment volume (TPV) growing 10% to $1.7 trillion; free cash flow reached $6.8 billion.

• Strategic Initiatives: PayPal focused on branded checkout enhancements, reducing latency by over 40%, and scaling Fastlane and PayPal Everywhere, with debit card TPV nearly doubling in Q4; Venmo monetization and BNPL grew 21%.

• Key Metrics: Transaction margin dollars remained stable, with branded checkout contributing significantly, though unbranded volume growth decelerated due to a price-to-value strategy.

• Progress: Strategic partnerships with NBCUniversal and Roku boosted Fastlane adoption, while AI-driven customer experience improvements are prioritized for 2025.

• Focus Areas: Investors should watch for updates on unbranded volume reacceleration and international market performance, as softness persists.

• Risks: A projected 17.9% year-over-year EPS decline to $1.15 in Q1 2025 could pressure stock price if guidance disappoints.

• Concerns: Competitive pressures in digital payments and macroeconomic impacts on consumer spending may challenge growth.

• Market Trends: The shift toward omnichannel and guest checkout solutions aligns with e-commerce growth, but regulatory scrutiny in fintech remains a risk.

Spotify Technology S.A. (SPOT) - April 29, Before Market Open

• Financial Trends: In Q3 2024, Spotify’s revenue grew 19% to €4.0 billion, driven by a 12% increase in premium subscribers to 252 million; EPS was €1.33, beating estimates, with gross margin at 29.2%.

• Strategic Initiatives: Spotify expanded its audiobook offerings, reaching 14 million monthly active users, and enhanced AI-driven personalization, including the AI Playlist feature in select markets.

• Key Metrics: Monthly active users (MAUs) rose 11% to 640 million, but ad-supported revenue growth slowed due to softer podcast advertising demand.

• Progress: Investments in podcasting and new verticals like audiobooks aim to diversify revenue, with premium ARPU up 9% year-over-year.

• Focus Areas: Investors should monitor subscriber growth momentum and audiobook adoption rates, as these are critical for long-term profitability.

• Risks: Margin compression from higher content costs and currency headwinds could impact Q4 results, especially in emerging markets.

• Concerns: Intensifying competition from Apple Music and Amazon Music may pressure market share and pricing power.

• Market Trends: The audio streaming market is growing, but economic uncertainty could curb discretionary spending on subscriptions.

Eli Lilly and Company (LLY) - May 1, Before Market Open

• Financial Trends: Q4 2024 revenue surged 45% to $13.53 billion, led by Mounjaro and Zepbound; non-GAAP EPS was $5.32, missing estimates slightly, with gross margin at 83.2%.

• Strategic Initiatives: Lilly expanded incretin production capacity, targeting 60% more salable doses in H1 2025, and launched Kisunla for Alzheimer’s and Ebglyss for immunology.

• Key Metrics: Non-incretin revenue grew 20%, but Trulicity revenue declined due to pricing pressures; effective tax rate was 12.5% on a non-GAAP basis.

• Progress: Zepbound’s new indication for obstructive sleep apnea and Omvoh’s approval for Crohn’s disease bolster Lilly’s portfolio diversification.

• Focus Areas: Investors should focus on Mounjaro/Zepbound supply updates and international revenue growth for incretins in H2 2025.

• Risks: Supply constraints and pricing pressures in the U.S. incretin market could limit upside if demand outpaces production.

• Concerns: High R&D costs and potential regulatory delays for Phase 3 readouts may weigh on short-term profitability.

• Market Trends: The obesity and diabetes drug market is booming, but competition from Novo Nordisk and patent cliffs pose long-term risks.

Meet Evan Buenger

From a young age, Evan was fascinated by the stock market. At just 11 years old, he received a Wall Street Journal subscription for his birthday, sparking a lifelong passion for investing. Evan spent his formative years studying the strategies and philosophies of legendary investors like Paul Tudor Jones, Stanley Druckenmiller, and George Soros, absorbing their wisdom and developing his own unique approach to the markets.

As Evan's knowledge grew, he began to incorporate the time-tested, technically-based strategies of trading legends like William O'Neil and Richard Wyckoff into his own investment framework. By borrowing elements from each and rigorously testing them in real-time, Evan created a powerful conglomerate strategy that encompasses fundamentals, technicals, and macroeconomics.

Today, Evan is a professional trader and was a top contender in the 2020 US Investing Championship. His extraordinary performance, with a 141.8% return, is a testament to his studious background, well-informed approach, and unwavering dedication to his craft.

At the core of Evan's strategy is identifying stocks that benefit from sector trends and rotation. By combining fundamental analysis with a focus on relative strength and advanced technical analysis techniques, Evan is able to identify the stocks that are most likely to move higher or lower over the intermediate term.

While he keeps a close eye on macroeconomic trends, his willingness to adapt to changing market conditions, as well as his developed ability to know when to and not to act in a fast-moving market, is what sets him apart. Evan has consistently demonstrated his ability to navigate even the most challenging investment environments. His impressive track record and unique perspective make him a valuable voice in the world of finance, and he is thrilled to have the opportunity to share his insights and expertise with subscribers of the Bull and Bear Brief.

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