It’s that time of the quarter where we see what many of the biggest and most successful investors have been buying. Needless to say, I was very pleased to see that Warren Buffett and Berkshire Hathaway had bought sizable stakes into both Citigroup and Paramount, and a smaller stake in Ally Financial. These are three of our favorite stocks and are all deeply undervalued. All the stocks rallied substantially today as the market digested the news. Citigroup is one of our largest positions and the stock could rally by 50% and still trade at a discount to tangible book value, let alone where tangible book value will be by the end of the year, as that number is growing. Ally is a similar story with the stock trading at around 5 times earnings. Paramount (formerly ViacomCBS) is making the painful transition towards streaming, but is making material headway. The company is still very profitable and trades very cheaply as do many of its peers, after the carnage brought on Netflix earlier in the year when it lost about 80%.
I also found it interesting that Michael Burry, famously played by Christian Bale in the Big Short, announced that he is short Apple Inc. stock. Apple is an amazing company, probably the best business in the world. However, the valuation multiple has expanded considerably over the last few years. Most of its peers are down quite a bit more than Apple is, although it is down about 17-18% from its highs as well. If the bear market gets worse, it would seem reasonable that stocks such as Apple and Microsoft would be a big part of that if previous history can teach us anything, although anything can of course happen. Below is a link to Buffett’s purchases and I just wanted to provide this quick update as it was very relevant and thankfully very favorable to investors of T&T Capital Management.