I'm still not convinced about a recession this year; A bad start to the year for the 'Magnificent Seven'; Warren Buffett nailed his Apple sale; My tips for the Berkshire Hathaway annual meeting (which I will miss this year)

April 28, 2025

1) The economists at asset manager Apollo Global Management (APO) recently published a 40-slide presentation that does a good job of capturing a range of data: How are US consumers and firms responding to tariffs?

They are predicting a recession by this summer, as their slides show new orders and corporate capital-expenditure spending plans plunging as inventories soar.

Here's how they see it playing out (from the slide on page 4 of the presentation):

I'm not convinced, however...

Some of the metrics that are plunging have been good contra-indicators. In other words, if you look at the last time they fell, it was a great time to buy stocks.

For example, consider CEO confidence, which last plunged in 2022. Here's the slide on page 16 of the Apollo presentation:

Of course, we all know what happened next... Stocks soared in the following months.

I don't disagree with the real-money bettors on Polymarket – as of earlier this morning, they think there's a 56% chance of a recession this year.

But that's not a certainty... It's basically a coin flip.

2) It's earnings season for the "Magnificent Seven" mega-caps...

Last week, Tesla (TSLA) and Alphabet (GOOGL) reported earnings – which I covered in Wednesday's and Friday's e-mails, respectively. And this week, Meta Platforms (META), Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN) will report their earnings. Note that Nvidia (NVDA) doesn't report until late May.

Here's a Wall Street Journal article from this weekend about how they're all underperforming the market this year: A Reckoning for the Magnificent Seven Tests the Market. Excerpt:

[Even] after a rally this past week, the Magnificent Seven are off to their worst start to a year since the 2022 slide, according to Dow Jones Market Data. Each stock has fallen more than 6.5%, and they have collectively lost $2.5 trillion in market value. The Roundhill Magnificent Seven exchange-traded fund just posted its best four-day run ever, notching a 13% climb – that still left it down about 15% this year.

Take a look at this chart from the article:

And as the WSJ continues:

The S&P 500's total return, which includes dividends, is down 5.7% this year. Without the Magnificent Seven, returns would be down just 1.2%, according to S&P Dow Jones Indices data. The tech-heavy Nasdaq Composite Index is in a bear market, having fallen 20% from its recent high, and is still down 10% on the year.

Oh, how I yearn for the days in late 2022... when this group of stocks was downright cheap, as they severely underperformed the market. Take a look at this next chart from the same WSJ article:

By this metric, the Magnificent Seven stocks still don't look like buys – and I tend to agree. That said, I still think investors should continue to be comfortable hanging on to my favorites over the past six years – Alphabet, Meta, and Amazon.

3) Berkshire Hathaway (BRK-B) CEO Warren Buffett nailed the sale of the one Magnificent Seven stock he owns, as this WSJ article from last week notes: Warren Buffett Timed His Apple Stock Sale to Perfection. What's Next? Excerpt:

Berkshire Hathaway is sitting on more cash than any company in history, including its own, at about $318 billion. Much of it piled up the old-fashioned way, in a steady stream from the conglomerate's subsidiaries and investments. That got turbocharged last year when Berkshire sold a large chunk of its stock portfolio – notably shares of Apple.

The gigantic bet dating to 2016 had made some investors nervous. Now that the iPhone maker has lost $1 trillion, or a quarter of its value, since its December peak, Buffett looks prescient.

No wonder Berkshire has outperformed the S&P 500 Index and Apple by such a wide margin this year:

The problem is that Berkshire's stock isn't cheap...

It was 4.4% overvalued when I last calculated its intrinsic value in my March 3 e-mail. And with the stock up and the market down since then, it's now closer to 10% overvalued. (I'll do a full valuation analysis next week after Berkshire reports first-quarter earnings this coming weekend – stay tuned.)

That doesn't mean long-term holders should sell, but it's not a "buy" at these levels.

4) Speaking of this weekend...

Berkshire is holding its annual meeting this coming Saturday (also known as the "Woodstock for Capitalists"), May 3, in Buffett's hometown of Omaha, Nebraska.

I've attended every year since the late 1990s (with the exception of the two COVID-19 years). But this year, my streak will come to an end because of a family event I can't miss.

Like most of my readers, I'll instead have to be content with the livestream from CNBC. It will start at 8:30 a.m. Eastern time.

Here are answers to a couple of the common questions I've been getting...

Is it too late to go? What about last-minute flights, hotels, and meeting credentials?

No, it's not too late.

There are always plenty of hotels with rooms available a short drive away. Flights in and out of Omaha are always fully booked or wildly expensive, but if you want to save money, fly into Kansas City and drive three hours.

And lots of people have extra credentials – just ask around! Or buy one B-share of Berkshire (it last closed at $531) and you can get a credential on-site.

Other than the meeting itself, what events should I go to?

Here's the official guide from Berkshire, and here's a detailed insiders' guide courtesy of Good Investing's Tilman Versch.

Below are the events I would go to on Friday, all in different locations (times are local/Central time):

Vitaliy Katsenelson is hosting a breakfast Q&A from 7:30 a.m. to 10 a.m. (register here).
Mohnish Pabrai will be interviewed from 9:30 a.m. to 11 a.m. (register here).
Guy Spier's VALUEx from 10 a.m. to 3 p.m. is sold out but will be livestreamed here.
Creighton University is hosting a value investing panel and reception from 3 p.m. to 6 p.m. (register here).
If you're willing to spend $425 per person, Columbia Business School is hosting a "From Graham to Buffett and Beyond" dinner and panel from 6 p.m. to 9 p.m. (register here).

Of course, the Berkshire meeting itself is on Saturday.

And on Sunday, I recommend two things: the fun 5K race in the morning (you can register here, and it costs $75 per person)... followed by the free brunch hosted by one of my favorite insurance companies, Markel (MKL) (get more details about registering here).

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.