🌯 Chipotle Overtakes Starbucks

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Happy Sunday

I hope you all had a great, refreshing weekend.

As you may notice, this week’s issue has much more visuals than usual.

I am experimenting with a different format which focuses more on story telling.

The design of the newsletter will also be changing soon.

Let me know what you think in the feedback section at the end!

Some key data bites from this week that you should know: 

• Berkshire Hathaway’s $BRK.B operating income increase +39% in Q1 to $11.2B.

• Equinox is launching a $40,000 gym membership aimed to help you live longer.

• $1 in crypto unrealized gains lead to $0.09 in extra spending by households.

• Social security is now expected to run out by 2035.

• Tesla $TSLA sales in China fell 18% YoY in Q1.

• Reddit $RDDT CEO owns 61.5% of class A shares.

• Tinder’s $MTCH paying user base dropped 9% YoY.

• 1 in 24 NYC residents is a millionaire.

• Robinhood $HOOD gold subscribers increased 42% YoY to 1.68M.

In today’s newsletter:

• 💰 Buffett’s Cash Pile Hits $189B

• 📊 Palantir Misses Forward Guidance

• 📺 Disney Sees Future Streaming Losses

• 🎉 Apple Unveils New iPads

• 🌯 Chipotle Is Bigger Than Starbucks

• 🪦 RIP Jim Simons

Let’s dive right in!

There’s a few things that are certain in life.

Death, taxes, and Berkshire Hathaway having a massive cash position.

Last Saturday, the company released its first-quarter earnings report.

The company holds $36B in cash and $153B in US treasuries, adding up to a total cash position of $189B.

During the shareholder meeting, Buffett indicated that they’re waiting for the right opportunity before making any big moves.

He also suggested that the cash pile would very likely grow past $200B by the end of Q2.

As we’ve come to learn, Berkshire enjoys playing the waiting game, ready to strike when the perfect opportunity comes along.

Now, let’s talk about a company Buffett would most likely never invest in, partly because it’s fairly difficult to understand — Palantir.

Shares of the big data analytics company tumbled 8% after they reported their Q1 FY24 earnings last Monday.

Here’s a rundown of the numbers:

• ⚪️ Earnings: $0.08 vs. $0.08 Est.

• 🟢 Revenue: $634M vs. $625M Est.

Despite a strong quarter, which saw US commercial customer count increase +69% YoY, 87 deals over $1M closed, and the sixth consecutive quarter of GAAP profitability, the stock stumbled.

Why? Palantir's Q2 revenue guidance of $649M - $653M fell short of the expected $653M.

Their full-year revenue outlook also trailed slightly at $2.68B - $2.69B versus the anticipated $2.71B.

When it comes to high growth names, expectations are everything, especially when a stock is up +100% over the last year.

Disney saw a similar fate as Palantir, with its stock tanking 10% after they reported Q2 FY24 earnings.

The key figures:

• 🟢 Earnings: $1.21 vs. $1.10 Est.

• 🔴 Revenue: $22.08B vs. $22.11B Est.

• 🔴 Disney+ Subscribers: 153.6M vs. 155.6M Est.

The company saw a 1% increase in revenue to $22.1B and a notable 17% surge in operating income.

The bright spot was Disney's direct-to-consumer segment (Disney+ & Hulu), which achieved profitability with $47M in operating income.

This reversed the massive $587M loss from the same quarter last year.

However, concerns arose as the company forecasted this segment to incur losses next quarter.

This is mostly due to increased programming costs associated with its Indian brand Disney+ Hotstar.

This, along with the fact that Disney saw an 8% decline in revenue from its traditional cable business, left investors disappointed.

Adjusted earnings, which are anticipated to rise by 25% for the year, up from the previous forecast of 20%, was not enough to save the stock from falling.

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Who doesn’t love a slightly faster iPad?

This week, Apple released its new set of iPads.

The spotlight focused on the new iPad Pro, the company’s more expensive tablet.

Powered by a new tandem OLED display and the latest M4 chip, the company boasted it as the thinnest Apple product ever.

The 13 inch 256GB model comes in at a whopping $1,299.

Zooming out, Apple’s iPad segment has seen little to no growth in revenue since 2014, and the last quarter saw a 17% dip YoY.

That being said, in the latest earnings call, CFO Luca Maestri said they are expecting a double-digit YoY increase in iPad sales in the current quarter.

It’ll be interesting to see how this release, which CEO Tim Cook dubbed “the biggest day for iPad since its introduction,” will pan out over the next few quarters.

The extra guac is starting to add up.

Chipotle has been on a roll, now overtaking Starbucks in market cap for the first time ever.

Starbucks is facing a difficult stretch, with its stock plunging nearly 15% after disappointing earnings, declining same store sales, and reduced guidance.

But while coffee sales dipped, burrito cravings soared. 

Chipotle's Q1 showed a 14.1% revenue boost to $2.7B, 7% growth in comparable restaurant sales, expanded margins, and a 23.9% jump in earnings per share.

And despite six price hikes since 2021, Chipotle fans keep coming back (myself included).

The big question: do you think this tasty trend will keep sizzling?

Do you know this guy?

A lot of people don’t, but you could make a strong argument for him being the most successful investor of all time.

Jim Simons was a mathematician that used quantitative models and algorithms within his Renaissance Technologies hedge fund to drive ridiculous returns.

How crazy are we talking?

Between 1988 and 2018, his Medallion Fund enjoyed gross annualized returns of 66%.

If you take into account his fixed fee of 5% and 44% performance fee, the net annualized returns were 39%.

To put it into context, this more than doubles Warren Buffett’s incredible historical track record of 20% AFTER you take into account the large cut Renaissance takes.

He was truly playing chess while others were playing checkers.

The brilliant investor passed away at the age of 86 on Friday. May he rest in peace.

Here’s a breakdown of the top 10 holdings under Renaissance Technologies from their most recent filing.

Keep in mind, the holdings have likely changed as the filing is released 45 days after the end of the quarter, and we’re coming up on the release of Q2.

📚 Recommended Reading

Daniel Mnke started the All-in-One Investing Platform to share his research and portfolio.

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He focuses on asymmetric bets—investments with limited downside and unlimited upside.

These opportunities exist, but most investors look in the wrong places. That's why he spends most of my time researching micro- and small-caps.

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Notable Companies Reporting Earnings Next Week:

• Monday (5/13):

  • StoneCo $STNE, PaySafe $PSFE

• Tuesday (5/14):

  • Home Depot $HD, Alibaba $BABA, Sea Limited $SE

• Wednesday (5/15):

  • Cisco $CSCO, Monday.com $MDAY

• Thursday (5/16):

  • Walmart $WMT, Applied Materials $AMAT, JD.com $JD, Take-Two $TTWO

All of the companies that are reporting earnings next week can be viewed here.

Buys

• Earl Blumenauer (D)

  • Company: Goldman Sachs ($GS)

    • Amount Purchased: $15K - $50K

  • Company: Wells Fargo ($WFC)

    • Amount Purchased: $15K - $50K

• Jonathan Jackson (D)

  • Company: JPMorgan Chase ($JPM)

    • Amount Purchased: $15K - $50K

• Ro Khanna (D)

  • Company: Starbucks ($SBUX)

    • Amount Purchased: $24K - $150K

  • Company: Apple ($AAPL)

    • Amount Purchased: $15K - $50K

  • Company: Tesla ($TSLA)

    • Amount Purchased: $15K - $50K

• Maria Elvira Salazar (D)

  • Company: Clearway Energy ($CWEN.A)

    • Amount Purchased: $15K - $50K

Sells

• Ro Khanna (D)

  • Company: iShares Russell 1000 Value ETF ($IWD)

    • Amount Sold: $250K - $500K

  • Company: General Electric ($GE)

    • Amount Sold: $50K - $100K

• Mark Green (R)

  • Company: NGL Energy Partners ($NGL)

    • Amount Sold: $100K - $250K

Buys

• Disney ($DIS)

  • Insider: James Gorman (Director)

    • # of Shares Purchased: 20,000

    • $ Amount: $2,120,628

    • SEC Forms: [1]

• Malibu Boats ($MBUU)

  • Insider: Mark Lanigan (Director)

    • # of Shares Purchased: 20,000

    • $ Amount: $668,600

    • SEC Forms: [1]

Sells

• Palantir ($PLTR)

  • Insider: Peter Thiel (Director)

    • # of Shares Sold: 12,955,244

    • $ Amount: $273,490,549

    • SEC Forms: [1]

• Palo Alto Networks ($PANW)

  • Insider: Lee Klarich (EVP, Chief Product Officer)

    • # of Shares Sold: 121,276

    • $ Amount: $36,334,450

    • SEC Forms: [1]

• AMD ($AMD)

  • Insider: Lisa Su (Chair, President & CEO)

    • # of Shares Sold: 125,000

    • $ Amount: $19,211,255

    • SEC Forms: [1]

🤝 Review of the Week