Happy Monday!

📝 Focus

• Warren and Charlie’s Record Run

• + 10 Powerful Investing Lessons

📊 In the Markets

• Gambling on DraftKings

📖 MoneyFitt Explains

🎓️ Share Buybacks

📝 Focus

Warren and Charlie's Record Run

On Saturday, Berkshire Hathaway, led by 92-year-old Warren Buffett and 99-year-old Charlie Munger, reported second-quarter operating profit up by 7% to a record $10bn. (Net profits at the firm are more volatile: gains from stock holdings led to a $36bn net profit vs a $44bn loss the year before.)

..... ▷ Rising interest rates (plus improved results at auto insurer Geico) boosted profits for Berkshire’s insurance businesses, but impacted home buying at Clayton Home, RV sales at Forest River and earnings, reflecting lower shipments of consumer goods, at BNSF railroad.

..... ▷ Indicating some wariness over stock price levels, Berkshire sold $8bn more shares than it bought over the quarter while the buyback of its own stock🎓 was only $1.4bn from $4.4bn the previous quarter. Apple made up about half of Berkshire’s $353bn equity portfolio.

..... ▷ At a market cap (share price X number of shares) of $1.3 trillion, Berkshire Hathaway is the 7th most valuable company in the S&P 500. Warren Buffett is currently the world’s sixth wealthiest person, with a net worth of $118bn. He still lives in the same 6,570-square-foot house he bought in Omaha, Nebraska, for $31,500 in 1958. He has called it the "third-best investment he's ever made."

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In an extended Focus article, our guest writer Christina Chua gives us 10 crucial investing rules from the master himself, accompanied by practical advice for individual investors. From embracing long-term gains to mastering emotional control, these timeless insights can significantly enhance your investing prowess. Christina is an SVP and the Wealth Management product lead at KGI, and a writer of the popular LinkedIn newsletter, Christina’s Idea Space.

Warren Buffett, the legendary Oracle of Omaha, has cemented his status as one of the greatest investors of all time. With Berkshire Hathaway as his investment vehicle, Buffett has amassed a fortune and achieved unparalleled returns over decades. For those seeking to replicate his success, let's delve into 10 of his most important investing rules, complete with examples and practical advice for individual investors:

1. Invest in yourself: Buffett's most crucial piece of advice is to invest in yourself. For example, Buffett attributes much of his success to his completion of a Dale Carnegie public speaking course. As an investor, hone your skills through continuous reading and learning to make well-informed investment decisions. Attend seminars, listen to podcasts, and network with other investors to expand your knowledge.

2. Only invest in simple, understandable businesses: Buffett steers clear of overly complex companies, favouring straightforward businesses with strong fundamentals. For instance, he invests in companies like Coca-Cola and American Express, whose business models are easily understood. Emulate this approach by staying within your circle of competence. Join investment clubs or discussion forums to share ideas and learn about new industries.

3. Focus on long-term gains: Buffett buys stocks with the intention of holding them for the long run, often stating his favourite holding period is "forever." For example, he has held shares in American Express since 1963. Adopt a similar long-term mindset and don't react to market volatility. Avoid making impulsive decisions based on the latest headlines or short-term trends.

4. Value, value, value: Buffett is a staunch value investor, targeting high-quality companies trading below their intrinsic value. He famously invested in Washington Post in 1973, recognising its undervalued potential. Follow suit by seeking companies with strong fundamentals that the market has overlooked. Utilise stock screeners and financial analysis tools to identify potential value investments.

5. Do your homework: Rigorous analysis underpins Buffett's investments. For example, he reads annual reports and financial statements to gain insights into companies like IBM before making investment decisions. Exercise similar diligence by thoroughly researching companies before trusting them with your money. Create an investment checklist to ensure you cover all important aspects of a potential investment.

6. Diversify your holdings: Though Buffett believes in concentration, he diversifies Berkshire's holdings across industries and companies. For example, Berkshire's portfolio includes insurance, technology, and consumer goods companies. To reduce risk, spread your holdings across sectors and asset classes based on your risk tolerance. Consider investing in low-cost index funds or ETFs to achieve broad diversification.

7. But don't over-diversify: Buffett prioritises quality over quantity. He focuses on his most compelling investment ideas, such as Apple, which became Berkshire's largest holding in 2018. Avoid over-diversifying and concentrate on your best investment opportunities. Periodically review your portfolio to ensure it remains aligned with your investment goals and risk tolerance.

8. Leave emotions out of it: Buffett bases his investment decisions on facts and fundamentals rather than emotions or opinions. For example, during the 2008 financial crisis, he invested in Goldman Sachs despite widespread panic. Keep a cool head and make decisions based on company and industry fundamentals. Develop a set of emotional checklists to avoid making decisions based on fear or greed.

9. Maintain discipline: Buffett adheres to strict investing discipline, regardless of market conditions. For instance, he resisted the urge to invest in the dot-com bubble, adhering to his value investing principles. Define your own investing rules and stick to them, regardless of market fluctuations or news events. Establish a clear sell discipline to ensure you exit positions when necessary.

10. Review and adapt: While disciplined, Buffett regularly reevaluates his holdings and investment strategy. For example, he exited his newspaper investments in 2020, acknowledging the industry's decline. Review your portfolio and strategy at least annually and be prepared to adapt based on changes in companies, industries, or macroeconomic conditions. Stay open-minded and flexible in your approach, learning from your successes and failures.

By embracing these invaluable investing lessons from Warren Buffett, you can significantly improve your chances of success in the stock market. With a focus on value, a long-term perspective, emotional control, diversification, and disciplined decision-making, you, too, can follow in the footsteps of the Oracle of Omaha and secure your financial future. These principles have stood the test of time and have served Buffett well—they can do the same for you!

(Click here for the original article.)

📊 In the Markets

Party: Wall Street stocks experienced their longest daily losing streak in three months as investors struggled for direction amid weaker-than-expected US jobs growth (187k job additions in July vs 200k expected, flat from June’s downwardly-revised 185k; unemployment sank back to 3.5%, near a record low), mixed earnings from major tech companies (Amazon traded up 8.3% vs Apple down 4.8%) and rising Treasury yields. The S&P 500 fell 0.5%, wiping out gains from earlier in the day and posting a 2.3% decline for the week. The tech-heavy Nasdaq closed 0.4% lower, with a 2.8% drop over the week.

..... ▷ Meanwhile, 2023 meme stock Tupperware, which was almost totally out of cash in April, soared 35.5% after the struggling icon of a long-gone era of home shopping announced a debt restructuring.

Gambling on DraftKings

Leading US sports gambling company DraftKings popped up 6% on Friday on better-than-expected second-quarter revenues of $875mn and raised full-year guidance, and the CEO’s assertion that it remains on track to be profitable in 2024. DraftKings reported a 40% increase in monthly average users (MAU) to 2.1 million, with average revenue per user (ARPU) at $137, up 33% from the previous year. MAU growth is flattered by the spread of sports betting and iGaming state by state across the US, which boosts the size of DraftKings’ geographical footprint, and ARPU is helped as each market matures. DraftKings' stock has nearly tripled in 2023, benefiting from the ongoing legalisation of America's sports betting industry.

..... ▷ The growth of the sports betting industry was kicked off by a US Supreme Court decision in 2018 that struck down the Professional and Amateur Sports Protection Act of 1992 (PASPA), a federal law that barred gambling on football, basketball, baseball and other sports in most states other than Nevada. The decision allowed each state to determine whether it wanted to legalise sports betting, and since then, nearly every US state legislature has introduced a sports betting bill, with many enacting laws to regulate the activity, creating a huge and growing market for sports betting in the US. But it’s still illegal, for now, in California, Texas and Florida, the three most populous US states, with more than 27% of the total population.

..... ▷ DraftKings is a platform that offers daily fantasy sports, sports betting, and gambling products. Users can play and bet on various sports and leagues and win money based on their performance. DraftKings makes money by taking a percentage cut from playing tournaments, sports betting and gambling products, advertising on its platform, as well as fees from its B2B offering and NFT marketplace.

..... ▷ The US online sports betting market is estimated to be worth $7.6bn in 2023 and is expected to grow to $14.4bn by 2027 for a compound annual growth rate (CAGR) of 17%. DraftKings faces the stiffest competition from FanDuel (from Flutter Entertainment, which is seeking a US IPO, which may lift the whole sector further), but also BetMGM (a JV with Entain), Caesars (which owns William Hill) and Wynn Resorts. While DraftKings has advantages like brand recognition and innovation, it also deals with regulatory challenges and high customer acquisition costs. Compared to traditional Las Vegas casino operators, which have more diversified revenue streams, DraftKings and FanDuel target a younger, more tech-savvy market.

Final words: Don’t do it! Just as in casino gambling, “The house always wins.”