Where the 'Smart Money' Is Spending Big Money
The Weekend Edition is pulled from the daily Stansberry Digest.
The market has looked wobbly of late...
Since making new highs at the end of October, most of the major U.S. indexes are down. The exception is the Dow Jones Industrial Average, which made a new high on November 12 (but has sold off slightly since then).
The big narrative?
The buzz around AI has cooled a little over the past month or so. Bubble concerns... questions about future growth and "circular" financing among big AI players... and public blowback has gone more mainstream.
Several mega-cap tech companies saw their shares fall in recent weeks. They reported earnings that showed generally good results, but they weren't as audacious in their future guidance as analysts have been used to in the past few years.
Meanwhile, Federal Reserve officials have indicated the central bank might not lower interest rates at its next meeting in December. They've cited renewed concerns about inflation lingering around an elevated 3% clip.
But, at the same time, the labor market is weakening. That's in part due to fears and realities of AI taking people's jobs. Layoffs are piling up, and entry-level roles are disappearing. Plus, the government shutdown is expected to eat into the next quarterly GDP numbers.
There are signs of concern in the credit markets, too. High-yield credit spreads have widened some. Still, they're only up from historically low levels that don't scream "crisis imminent."
Overall, though, we're looking at slowing growth, sticky and/or rising inflation, and rising unemployment. That's the definition of "stagflation."
So, while no one likes seeing stock prices go down, the better news right now is that the market's slide makes some sense. Meanwhile, we're seeing the "smart money" pour into two corners of the market...
Big Tech Buys From Wall Street Legends
Some big names have already been buying...
Last weekend, we read a few reports about notable new buys from Warren Buffett's Berkshire Hathaway (BRK-B) and famed investor Stanley Druckenmiller on the heels of their latest federally required 13F quarterly reports.
These reports show that sometime between the beginning of July and the end of September, both Berkshire and Druckenmiller's Duquesne Family Office opened brand-new positions in Alphabet (GOOGL).
Berkshire disclosed late on November 14 that it had bought 17.85 million Alphabet shares, worth nearly $5 billion. The stock rose about 3% in the first trading day following the news. It was the only new buy that Berkshire made in the quarter.
Meanwhile, Druckenmiller made 29 buys, including $25 million in Alphabet shares, $95 million of Amazon (AMZN), and roughly $56 million of Meta Platforms (META). All are relatively small positions in Duquesne's $4 billion U.S. equities portfolio... But still, it's skin in the game.
Duquesne also closed out 33 positions, including a complete position in Microsoft (MSFT).
This got me thinking about three things...
First: When both Berkshire and Druckenmiller buy the same stock in the same quarter, it's probably wise to pay attention.
Recall that all the mega-cap tech "hyperscalers" are spending billions on capital-intensive infrastructure and products related to the AI boom. But Alphabet has been the most appealing of the lot.
At the end of October, as the "Magnificent Seven" began to release quarterly earnings, we noted that despite increased costs and expenses, Alphabet's operating margins still grew to 31% in the quarter. And our colleague Whitney Tilson was amazed at how a company that big could keep growing so quickly and profitably.
As Whitney wrote, even though Alphabet's valuation had moved higher...
My view today is still the same as it has been for more than six years: Alphabet is a great stock for conservative, long-term-oriented investors.
Second: Berkshire's buy of Alphabet shares could be a sign of the "changing of the guard" in its leadership. Tech-focused investments have been rare for the company... And this one came after Buffett's announcement earlier this year that he would be retiring as CEO at the end of the year. As CNBC speculated on Monday...
The Alphabet investment likely came from one of his two lieutenants, Todd Combs or Ted Weschler, who increasingly influence Berkshire's $300 billion stock portfolio... The pair have been responsible for many of Berkshire's tech-leaning investments, including a stake in Amazon initiated in 2019.
Some have pointed out that Buffett lamented missing out on an earlier investment in Google. But I agree with CNBC that it's more likely a strategic change under new leadership than a sentimental gesture. Still, the position's size as one of the top 10 holdings in Berkshire's portfolio would suggest Buffett at least approved the purchase.
Third: I suspect Druckenmiller wouldn't be opening new positions in mega-cap tech companies if he thought the market was in a bubble that was due for a pop soon. He takes a macro view on the economy and markets, then finds investments or trades to fit his thesis.
That doesn't mean he got this call right... But if he's comfortable buying Big Tech, it means his firm is comfortable taking on risk in these richly valued markets.
The "smart money" has also poured money into hard assets...
As you know, the "great devaluation" is on. The dollar keeps weakening, meaning that assets cost more dollars to buy. That's bad news if you're sitting in cash, but great news if you're a company with hard assets... or if you've invested in one.
Wall Street and the U.S. government are both paying attention to real assets amid the Trump administration's trade war and a desire to boost manufacturing and production in the U.S.
The White House has its own portfolio now, essentially. The government has taken direct stakes with taxpayer money, in the name of national security, in public companies like chipmaker Intel (INTC), Canadian miners Lithium Americas (LAC) and Trilogy Metals (TMQ), and Nevada-based rare-earth business MP Materials (MP).
Share prices have skyrocketed, in some cases 90% or 200% overnight.
A lot of people are wondering what comes next in this story.
Well, according to some friends of ours, these government stakes are only the beginning of these dramatic moves, and the White House is now acting as the mother of all tailwinds to those who own the right stocks.
Last week, legendary natural resources investor Rick Rule and a special mystery guest pulled back the curtain on this rapidly evolving development.
They explained everything you need to understand... including the No. 1 move you should make immediately to ensure that you don't get left behind... and the name and ticker of a free "buy now" stock recommendation. You can check out the replay of this free event right now, to make sure you don't miss anything.
Good investing,
Corey McLaughlin with Nick Koziol
Editor's note: One massive buying spree from the U.S. government could soon send 300 times more money flooding into a short list of stocks considered crucial to our nation's security. This year alone, you could have already doubled your money on 28 of these stocks. And according to two of the best-connected investors in America, you still have time to prepare – but you need to make this one move before November 26.