Warren Buffett’s Berkshire Hathaway sold a number of stocks last quarter during the volatile market, according to a new regulatory filing. The Omaha-based conglomerate dumped its remaining $780 million stake in General Motors , a stock Berkshire has been trimming for a few quarters. Berkshire also sold its $650 million stake in materials company Celanese , while exiting smaller positions in United Parcel Service , Johnson & Johnson , Mondelez International and Procter & Gamble. Meanwhile, Berkshire trimmed its stakes in Amazon and Aon slightly, the filing showed. These holdings were still worth more than $1 billion each at the end of September, however. The conglomerate was also downsizing its top bets HP and Chevron . Some of these moves, especially ones involving smaller positions, could have been done by Buffett’s investing lieutenants Todd Combs and Ted Weschler, who each manage about $15 billion for Berkshire. It was previously revealed that Berkshire was a net seller of publicly traded stocks in the third quarter, buying $1.7 billion worth of equities while selling nearly $7 billion. The S & P 500 shed more than 3% last quarter before bouncing back this month. Besides these moves, the “Oracle of Omaha” kept his top holdings unchanged. Apple continued to be the conglomerate’s biggest bet by far, with a value north of $156 billion. Bank of America, American Express, Coca-Cola, Kraft Heinz and Moody’s were also Berkshire’s longtime holdings. Buffett has been in a defensive mode as of late. Not only was he selling stocks, he was also hoarding a record level of cash. Berkshire’s cash pile, mainly parked in short-term Treasury bills, hit $157.2 billion at the end of September thanks to a surge in bond yields. Berkshire has also asked the SEC to keep the details of one or more of its stock holdings confidential.
The snack aisle is seen during a tour of a new Amazon Go store in the Capitol Hill neighborhood of Seattle, Washington, U.S., on Monday, Feb. 24, 2020.
Chona Kasinger | Bloomberg | Getty Images
For more than a century, frosted cornflakes have been the backbone of Kellogg’s business. That changes Monday, when the company will spin off its stable cereal business in favor of its faster-growing snack unit and rename itself Kellanova.
The spinoff comes weeks after another wager that consumers will graze between meals, when J.M. Smuckerbought Twinkie maker Hostess Brands for $5.6 billion in a bid to expand its snack lineup.
But food companies’ majorbets on snacking come as investors fear the looming danger of Big Pharma’s blockbuster obesity and diabetes drugs Wegovy and Ozempic. Many investors have high hopes for the pharmaceuticals’ future, but their success could mean slower sales for the companies that produce Oreos, Doritos and Hershey’s Kisses.
Big Food’s bet on snacking began roughly a decade ago, and it’s only accelerated as the rest of the grocery aisles see sales stagnate, particularly as prices rise. The U.S. market for savory snacks is expected to grow 6% annually from 2022 through 2027, and sweet snacks’ sales are expected to rise 4.6%annually during that time, according to HSBC. Roughly three-quarters of consumers plan to snack every day, according to Accenture data.
Millennials and Generation Z consumers are fueling the trend. Younger generations snack more often than older consumers, said Kelsey Olsen, food and drink analyst for market research firm Mintel. Millennials and Gen-Z consumers tend to eat smaller meals that are closer together, creating more occasions to grab a snack.
At the same time, Novo Nordisk’s Ozempic and Wegovy have taken off, fueled by prescriptions to help patients lose weight. The drugs, known as GLP-1 agonists, suppress appetites by mimicking a gut hormone. Some patients even report developing aversions to foods with higher sugar and fat content — a category that includes many big snack brands.
More than 9 million prescriptions for these kinds of drugs were written in the U.S. in the fourth quarter of 2022, according to a Trilliant Health report.
Morgan Stanley estimates that the number of patients taking GLP-1 drugs could reach 24 million, or nearly 7% of the U.S. population, by 2035.
If so, consumption of baked goods and salty snacks could fall 3% — or even more if the new eating habits of the people using the treatments extend to their broader households and friends, according to Morgan Stanley’s research. That puts companies like Hershey, Mondelez, PepsiCo, General Mills and Kellogg’s successor Kellanova at risk.
But not everyone in the industry agrees with that assessment.
Boxes of Ozempic, a semaglutide injection drug used for treating type 2 diabetes and made by Novo Nordisk, is seen at a Rock Canyon Pharmacy in Provo, Utah, May 29, 2023.
George Frey | Reuters
After buying Hostess Brands, Smucker CEO Mark Smucker defended the future of Twinkies and Ding Dongs against the threat of GLP-1 drugs.
“There are multiple ways that consumers will continue to snack. … And given that consumers are going to continue to seek all different types of snacks, and sweet snacks are going to continue to be on the radar, we view that our projections here are sound,” he told analysts on a conference call.
For one, GLP-1 drugs like Wegovy and Ozempic are expensive, with a list price of roughly $1,000 a month. That high price has led some insurers to decide not to cover the treatments.
While some of the nation’s largest insurers, like CVS’s Aetna, cover prescriptions of these drugs, the federal Medicare program, many state Medicaid programs and some commercial insurers don’t, leaving patients to pick up the bills themselves.
Another factor could work in the favor of snack sales.Many of the consumers who eat the most junk food likely won’t be able to afford Wegovy or Ozempic.
“Consumption of indulgent salty snacks that would be considered ‘junk food’ generally over-indexes toward lower-income individuals, who are unlikely to be these drugs’ primary users, ” RBC analyst Nik Modi said in a research note Tuesday.
Modi wrote that he doesn’t believe the drugs will ultimately be problematic for the manufacturers of salty snacks.
What’s more, patients have to inject themselves once a week, and if they stop taking the treatments, their effects disappear, usually erasing any weight loss that had occurred over time.
“This sort of drug is super interesting in what it can do, but I think until it comes in a radically different formulation, in a pill or something like that, and something that has enduring impact and obviously the much lower price point, I think it’s going to be tricky,” said Oliver Wright, senior managing director of Accenture’s consumer goods and services unit.
Even if the drugs become more affordable and are more widely adopted, the change won’t happen overnight. Food companies will have time to adjust to shifting consumer behavior.
“We acknowledge that the impact in the near term is likely to be limited given drug adoption will grow gradually over time, but we could see a longer-term impact as drug prevalence increases,” Morgan Stanley’s Paula Kaufman wrote in a note to clients. “Moreover, we expect companies to adapt to changes in consumer behavior through innovation and portfolio reshaping efforts.”
That may mean slower sales growth than expected and moves to divest some brands. But Big Food has been making strides toward healthier options anyway. GLP-1 drugs could just put more pressure on companies to update their portfolios.
PepsiCo and Mondelez are among the companies that have snapped up smaller brands that make healthier snacks. Still, growing them into global powerhouses will take time.
Food companies are also looking internally, investing in their research and development teams to create new formulations that mirror the taste of their full-sugar and salt versions.
“My prediction is, before the end of the decade, we will have a healthy Oreo that can be put on a plate with an old one, and consumers won’t be able to tell them apart — and that will be a good thing,” Accenture’s Wright said.
Signage outside Intel headquarters in Santa Clara, California, on Monday, Jan. 30, 2023.
David Paul Morris | Bloomberg | Getty Images
Check out the companies making headlines before the bell.
Intel — Shares popped 6.7% after the chipmaker posted better-than-expected second-quarter results and a return to profitability after two consecutive losing periods. Intel’s forecast for the third quarter also came in above analyst expectations. The company reported adjusted earnings of 13 cents a share on revenues of $12.95 billion.
Roku — The streaming stock rallied nearly 10% after reporting a narrower-than-expected loss for the second quarter. Roku reported a loss of 76 cents a share and revenues of $847 million. Analysts polled by Refinitiv had anticipated a loss of $1.26 per share and $775 million in revenue.
Biogen — Biogen shares moved slightly lower after the biotechnology company said it’s acquiring Reata Pharmaceuticals for $172.50 per share, in a cash deal valued at about $7.3 billion. Shares of Reata soared more than 51% on the news.
Procter & Gamble — The consumer giant saw shares rise more than 1% in premarket trading after the company reported quarterly earnings and revenue that beat analysts’ expectations. However, P&G released a gloomy outlook for its fiscal 2024 sales that fell short of Wall Street’s estimates.
Exxon Mobil — Shares moved slightly lower after the oil stock posted mixed second-quarter results. The company reported earnings of $1.94 a share, excluding items, that fell short of the $2.01 expected by analysts, per Refinitiv. Revenues came in at $82.91 billion, above the expected $80.19 billion.
Chevron — The oil stock lost nearly 1% even after reporting a beat on the top and bottom lines for the second quarter. Earnings fell from a year ago due to a drop in oil prices.
First Solar – Shares soared 12% after the solar company posted earnings per share of $1.59 on revenue of $811 million for the second quarter. Those results beat Wall Street expectations of 96 cents per share on revenue of $721 million, according to Refinitiv. The company also announced plans to invest up to $1.1 billion to build a fifth manufacturing facility in the United States.
Enphase Energy – Shares of Enphase dropped more than 15% after the company posted second-quarter revenue Thursday of $711 million that fell short of analyst estimates of $722 million, according to Refinitiv. The stock also faced a wave of downgrades Friday morning from Deutsche Bank, Wells Fargo and Roth MKM.
Sweetgreen – Shares of the salad chain slid more than 13% after the company posted weak sales that missed Wall Street expectations in the second quarter and a net loss of $27.3 million, or 24 cents per share. Sweetgreen did say it’s aiming to turn a profit for the first time by 2024.
Ford Motor – The automaker said adoption of electric vehicles is going more slowly than the company forecast and that it expects to lose $4.5 billion on the EV business this year, widening losses from roughly $3 billion a year earlier. Otherwise, Ford posted strong quarterly earnings that beat Wall Street expectations and raised its full-year guidance. Shares were flat in premarket trading.
Juniper Networks — Shares of the technology company fell 8% after Juniper’s third-quarter guidance came in lighter than expected. The company said it expects earnings per share between 49 cents and 59 cents, with revenue between $1.34 billion and $1.44 billion. Analysts had penciled in 62 cents per share and $1.48 billion of revenue. The company’s second-quarter results did come in slightly above expectations.
AstraZeneca — U.S. listed shares of the drugmaker added more than 5% before the bell. The U.K.-based company reported second-quarter earnings of $2.15 per share on $11.42 billion in revenue. That surpassed the EPS of $1.95 expected by analysts polled by Refinitiv on revenues of $11.03 billion. AstraZeneca also said it would buy a portfolio of preclinical rare disease gene therapies from Pfizer for up to $1 billion.
Xpeng — The Chinese electric vehicle stock jumped more than 6% in the premarket. Jefferies upgraded shares to a buy from a hold, citing Xpeng’s joint development plan with Volkswagen
New York Community Bancorp — The regional bank stock rose about 2% before the bell after JPMorgan upgraded New York Community Bancorp to an overweight rating from neutral. The Wall Street firm called the company a “massive market share taker” in its upgrade.
Mondelez International — Mondelez International added 2.7% before the bell on strong second-quarter results. The snack maker on Thursday reported earnings of 76 cents a share, excluding items, on $8.51 billion in revenue. Analysts polled by Refinitiv had estimated EPS of 69 cents and revenues of $8.21 billion.
— CNBC’s Tanaya Macheel, Yun Li and Jesse Pound contributed reporting
Here are Friday’s biggest calls on Wall Street: Bank of America reiterates Amazon as buy Bank of America said it’s standing by its buy rating on the stock. “Maintain Buy on Amazon. Three overhangs on stock have been retail margin cuts, AWS revenue deceleration, and potential TAM saturation. [Thursday’s] letter set a positive framework for discussion of these on the 1Q call.” UBS reiterates Netflix as neutral UBS said all eyes will be on the password sharing crackdown when Netflix reports earnings next week. “We expect 1Q to show continued progress toward re-accelerating growth. We believe subs will come in ahead of mgmt’s outlook for ‘modest’ adds, helped by a slower ramp for paid sharing (shifting potential churn into 2Q).” Goldman Sachs upgrades VF Corp to buy from sell Goldman said in its upgrade of the apparel and footwear company that it sees improved profitability. ” VFC’s revenue and earnings trajectory has underperformed the market, but we believe the stock is nearing an inflection point with the balance of catalysts for the stock now weighted to the upside.” Read more about this call here. Piper Sandler downgrades Rivian to neutral from overweight Piper said it still likes the electric vehicle company but that it needs more capital. “In order for RIVN to justify its cost structure, the company must spread its investment over millions of units (just like Tesla does), and in order to finance such aggressive expansion, RIVN will need capital.” Read more about this call here. Mizuho initiates ResMed as buy Mizuho initiated the medical device maker of sleeping machines like CPAP and says ResMed is the “undisputed king of sleep.” “Our Buy rating is based on: 1) positive feedback from our proprietary Sleep survey that points to healthy underlying US volumes, 2) lingering pent-up demand due to US staffing shortages.” UBS reiterates Amazon as buy UBS said it’s standing by its buy rating on the stock but came away from the company’s shareholder letter with less optimism on a “game-changing direction around margins.” ” AMZN’s annual shareholder letter, a defense of investment, underscored the company’s commitment to invest and the breadth of Amazon’s ambitions – from retail and AWS, to content, healthcare, satellite internet, int’l, grocery, and more. A lot to manage. We come away less optimistic on any game-changing direction around margins and still unsettled by a cloudy outlook at AWS.” Citi opens a negative catalyst watch on Harley-Davidson Citi said it sees “increasing credit loss metrics for Harley-Davidson. “Our recent analysis of both securitized receivable delinquencies and used motorcycle pricing point to fewer borrowers making monthly payments and lower recovery values once bikes are repossessed, a recipe for increasing credit loss metrics and eventually a higher loan loss reserve.” Oppenheimer reiterates PulteGroup as a top pick Oppenheimer said the stock is still a favorite idea citing “multiple expansion.” “We expect multiple expansion given a positive backdrop for builders broadly and because PHM likely will have the highest ROE in the space this year.” Cowen reiterates Alphabet as outperform Cowen said it’s bullish heading into Alphabet earnings later this month. “Our 1Q Digital ad expert check call on 4/6 suggests that a resilient US consumer helped drive GOOG 1Q23 Search spend growth near 4Q levels despite NT macro headwinds.” Cowen reiterates Nvidia as outperform Cowen said Nvidia is a leader in AI. ” NVIDIA continues to lead from the front across all the most important AI verticals. Expect continued momentum in results.” JPMorgan upgrades Hello Group to overweight from neutral JPMorgan said in its upgrade of the China messaging and social search company and says it sees a “recovery.” “We upgrade MOMO from N to OW (recovery in 2H23 with better social sentiment).” William Blair reiterates Charles Schwab as outperform William Blair said it’s standing by its outperform rating on the stock heading into earnings next week. “First-quarter results should indicate that earnings momentum is slowing as cash sorting continues. Sorting is reducing sweep cash, which Schwab is replacing to a degree with higher cost short-term funding.” Stifel resumes Kraft Heinz, General Mills and Mondelez as buy Stifel resumed coverage of several food stocks like Kraft Heinz, General Mills and Mondelez and says they are at an inflection point. “While investors remain generally cautious on Food stocks after a strong performance in 2022, we believe the margin inflection could be stronger than expected and elasticity should remain stable and low.” Wells Fargo reiterates Estee Lauder as overweight Wells kept its overweight rating on shares of Estee Lauder and said China cosmetics import data signals a return to growth. “With our data tracking in China improving, and following constructive results from LVMH, we think it’s reasonable to assume a turn in China is underway.” Bank of America reiterates PayPal as buy Bank of America said it’s standing by its buy rating on the stock heading into earnings in early May. “Given ongoing macro cross-currents, we think the most likely scenario is for PYPL to continue providing top-line guidance one quarter at a time.” Barclays reiterates Disney as equal weight Barclays said it sees slowing streaming growth heading into Disney earnings in early May. ” Disney and WBD are both in another strategy transition phase and focused on taking out costs from the streaming business.” Bernstein reiterates Boeing as outperform Bernstein said it’s standing by its outperform rating on the stock after it a 737Max parts issue surfaced on Thursday. “Yesterday it was disclosed that Spirit Aerosystems identified a manufacturing process issue with a fitting used to attach the vertical fin of the 737MAX to the fuselage.” Stifel reiterates Microsoft as buy Stifel said it’s standing by its buy rating on Microsoft heading into earnings later this month. “Looking forward, a year ago management provided its early FY23 double-digit top and bottom line commentary, but we expect a less granular forward guide focused on OPEX vs revenue growth given the ongoing uncertainties within the global economy.” DA Davidson reiterates Deere as buy DA Davidson said the ag equipment company is a “near term buy.” “Ethanol usage does appear stable in the near term, and the megatrends are likely to take 20+ years to play out, making DE a near-term BUY.”
