1) Joby Aviation (JOBY) is surging again... and I see more upside ahead.
Regular readers know that I've been following along with the air-taxi company. In fact, less than a month ago in my July 8 e-mail, I shared the presentation I gave at the Value Investing Seminar in Italy pitching Joby.
As I concluded in that e-mail:
I still think this stock is a "promising speculation," despite its 90% run-up since I pitched it a year ago.
That day, Joby closed at $11.39 per share.
On July 21, I updated my readers on positive news from Joby. The stock went on to close that day at $16.84 per share, which marked a 48% surge since July 8. And as I said in that July 21 e-mail:
It might be tempting to sell after this initial run-up, but that would be a bad move. Given that many speculations go to zero, the only way it makes sense to invest in them is to let the winners run and become multibaggers.
Sure enough, the stock surged 19% yesterday to another all-time high of $20.39 per share. Through yesterday's close, it's up 79% since July 8.
Yesterday's big jump came in the wake of news that Joby agreed to acquire the passenger division from a company called Blade Air Mobility (BLDE). The deal is worth up to $125 million. And it marks a big step for Joby's move toward commercial flights.
Here's an excerpt from a new Wall Street Journal article with more details on the agreement:
[Joby] will receive operations in the U.S. and Europe, lounges and terminals, and the Blade brand. Operations will continue with the business functioning as a stand-alone entity within Santa Cruz, Calif.-based Joby upon closing. Joby will have the choice to pay the purchase price in cash or stock...
Joby Chief Executive JoeBen Bevirt in an interview with CNBC pointed to momentum in the business by way of a recent executive order from the Trump administration and stances from regulators around the world. He added that some aircraft testing is currently approved in Dubai.
As the WSJ also noted, Bevirt thinks that the executive order means the "potential to pull the timeline on commercialization here in the U.S."
I think the news flow is going to continue to be positive from Joby. So I would continue to let the stock run.
2) Moving on to the latest with one of my favorite stocks over the past quarter century...
Warren Buffett's Berkshire Hathaway (BRK-B) reported second-quarter earnings on Saturday. (You can see the full 10-Q here and the press release here.)
I always look forward to digging into Berkshire's earnings. So let's take a look...
At first glance, Berkshire appears to have posted another bad quarter. Earnings plunged 59% year over year from about $30.3 billion to $12.4 billion.
Here's the exact breakdown from the press release (the dollar figures are in millions, except for per-share amounts):
However, we must first set aside mark-to-market changes in the investment portfolio to understand what's actually happening...
One of those changes was a gain of roughly $18.8 billion in last year's second quarter versus only about $5 billion this year.
Another was a noncash $3.8 billion charge to partially write down the value of Berkshire's holding in Kraft Heinz (KHC) to align it with the market price.
As I've said previously with Berkshire, these noncash fluctuations in the company's massive stock holdings are largely meaningless over short periods of time.
On the other hand, a more relevant metric is operating earnings. Year over year, these fell 3.8% during the quarter. Take a look at this next table from the press release (the dollar figures are in millions):
Headlines about Berkshire's drop in operating earnings are likely the reason the stock fell 2.9% yesterday.
But my friend and former partner Glenn Tongue pointed out that the operating earnings number is misleading on the surface. As he told me in a private e-mail:
If Buffett taught us anything, it's that you need to at least read the footnotes (if not the whole 10-Q).
The largest discrepancy between the headlines and the economics of the business relates to the currency translation charges that relate to Berkshire's foreign currency denominated borrowings.
The accounting analysis would put you to sleep. But essentially, a liability (debt issued in foreign currencies) gets marked to market... while the asset (holdings in foreign companies) does not.
So whenever the dollar weakens, there will likely be negative currency translation – and a corresponding hit to earnings, however meaningless.
And as Glenn continued, the amounts are significant:
Per the footnote in the table, "foreign currency exchange losses related to non-U.S. Dollar denominated debt in 2025 [was] $877 million in the second quarter... and in 2024 [were] foreign currency exchange gains of $446 million in the second quarter."
If we adjust for these gains and losses, Berkshire's operating earnings in the second quarter would have been $12.0 billion versus $11.15 billion in last year's second quarter. That's 7.9% growth, which is very respectable for a company of Berkshire's scale.
That's not all. Glenn also noted that:
While insurance underwriting profit dropped 12%, $2.0 billion is still an incredible number. And BNSF, Berkshire Hathaway Energy, and manufacturing, service, and retailing results were all up nicely year over year.
Thank you for the insights, Glenn!
Next, let's turn to the cash-flow statement...
Cash flows from operating activities came in at about $10.1 billion. That's down from around $13.6 billion in last year's second quarter.
And capital expenditures were roughly $4.9 billion. That's up slightly from about $4.5 billion in the same quarter last year. Berkshire continues to invest heavily in maintaining and growing its many businesses.
Buffett – and his colleagues Ted Weschler and Todd Combs, who have been involved in the investing side of the business – were once again net sellers of stocks during the quarter...
Berkshire sold about $6.9 billion worth of stocks while only purchasing roughly $3.9 billion in the quarter. That nets to about $3 billion of stock sales.
And with more than $5 billion of free cash flow, Berkshire's cash further ballooned to roughly $344 billion.
For perspective, that's bigger than the market cap of 477 of the companies in the S&P 500 Index.
The increasing cash pile still leaves investors asking the big question...
What will Buffett and his designated successor, Greg Abel, do with all that cash?
They would love to invest it in wonderful businesses at fair prices – either public or private. But they're not finding much. Buffett lamented that point at the annual meeting (though he did say, "We came pretty close to spending $10 billion").
Buffett certainly isn't putting it to work buying back Berkshire's shares...
He started doing so in 2018 and ramped it up heavily in 2020 and 2021.
But since then, the trend has been largely downward. In fact, Berkshire hasn't made any repurchases in the past four quarters. Take a look at the chart below:
I still think the reason Buffett has ceased share repurchases is simple...
Berkshire's stock has done well over the past year. And it was fully valued for most of the quarter. (I'll discuss the valuation tomorrow.)
Unless this changes or the stock market has a substantial pullback, I expect Berkshire's cash hoard to continue to grow.
I've said previously that Buffett is likely OK with this in the short term. That's probably because he might be expecting more turmoil in the markets, based on the concerns he expressed at the meeting about tariffs and fiscal deficits.
But at some point, it wouldn't surprise me if Buffett and Abel announce that Berkshire will start returning capital to shareholders via dividends. That could happen at next year's annual meeting.
If so, I think they might do what big-box retailer Costco Wholesale (COST) does: pay a modest ongoing dividend plus occasional large special dividends.
Again, looking ahead to tomorrow, I'll update my estimate of Berkshire's intrinsic value. So stay tuned!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.