Cable Just Had Its Worst Quarter Ever, Plus What Will Berkshire Hathaway Do With Its $86 Billion Cash Pile?

by 6 months ago

morning brew

Happy Friday, Crew. Markets had a good run this week—Hopefully they don’t Sink-o de Mayo (we love a bad Holiday-themed joke) now that earnings season’s reaching an end. Here’s your Brew for May 5th.

QUOTE OF THE DAY

“It’s a bit confusing because one is a letter and one is a number”—Elon Musk on how Tesla avoided having its model names spell S. E. X. Apparently S, 3, X (and now Y) is much more subtle.

Market Snapshot

  • Earnings kept U.S. stocks afloat Thursday on the worst day for oil in half a year—looks like the supply glut is taking its toll.
  • American treasury yields rose to the highest point in weeks, while European bonds fell. The pound, euro and dollar all rose slightly.

 

Bud Isn’t Going Anywhere

Anheuser-Busch InBev (+5.74%), the behemoth that brews America’s most popular beer, surprised investors this week by posting a 5.8% rise in profits. The Belgian company says its second-largest market, Brazil, is finally climbing out of the sales-killing recession.

But, we’re not here to talk about Brazil. We’re here to talk about America… the beer AND the country. Both of which are a bit, flat, for this mega-brewery.

 

A beer called America?

Remember last year’s marketing stunt where Bud was briefly renamed ‘America?’ Well, it totally flopped. Even though Americans love Corona (a lot), which also falls under InBev’s beach umbrella, mainstays like Bud and Bud Light are still seriously lagging stateside.

It’s all because of craft beer. Americans just don’t want to drink the same old brews anymore. 5,000 craft breweries opening in the last 20 years proves it, and InBev is trying hard to latch on to the trend.

This week it sucked up its 10th craft brewery: Wicked Weed will join InBev’s arsenal next to Goose Island and Blue Point. The North Carolina brewery produced 22,000 barrels last year… A few less than AB InBev’s /beer.wikia.com/wiki/Anheuser-Busch”>125 million.

 

Riding the wave

InBev isn’t the only mega-brewery trying to stay relevant. We hate to kink your draft lines, but your favorite beer is probably owned by one of just four massive companies.

These competitors have been snapping up smaller hop-erations like crazy. Heineken (+1.59%), the second largest after InBev, just finished acquiring Lagunitas in California.

So, if you’re dead-set on supporting local breweries (and not the Man) you might be hard-pressed. Luckily, there’s another option about to tap into the U.S. market.

 

IPOs for IPAs

BrewDog, a Scottish brewery and pub chain that’s now worth $1.29 billion, just opened a 100,000-square-foot facility in Ohio. To fund its rapid expansion (and A+ protest brews) the company is taking an unusual approach.

Equity for Punks (are you seeing a theme here?) lets anyone buy stock in the brewery so it can continue expanding. Some of the earliest investors have seen returns of almost 2,800%. Turns out there’s always money in the beer stand.

 

Cable Just Had Its Worst Quarter Ever

762,000 people have cut the cord this year, almost seven times more than the same period in 2016. It’s just another sign that cable is losing its grip on the American living room.

Now that virtually every must-watch show is streamable, it just comes down to which one: Apple TV, Amazon Prime, Sling TV and plenty more are all trying to attract the newly cordless to their flock. May the stream be with you.

 

Berkshire Has a Way

Berkshire Hathaway (-0.18%) shareholders will converge on Omaha, Nebraska this weekend. There’s one major question CEO Warren Buffet is sure to receive: what on Earth does he plan to do with the company’s $86.4 billion cash pile? A wallet that fat opens up a wide world of possible acquisitions, even up to the $100 billion range. So, what are the possibilities?

  • CSX (+0.39%) or Norfolk Southern (-0.32%) would add to Buffett’s BNSF railroad holdings, and their combined market cap is well within the affordable range.
  • Nike (-0.11%), with a market cap of $89 billion, wouldn’t be surprising either—Buffet has personally endorsed a Berkshire-owned running shoe
  • Costco (+1.46%) has largely avoided the retail struggles sweeping the nation. It could add to Berkshire’s retail portfolio.

Buffet will be looking for established companies, with wide-ranging products and a solid history of returns. Here’s a handy chart of some other possible acquisitions. It’s value investing 101, folks.

 

Funding the Future

CEO Tim Cook said this week that Apple (-0.36%) is Cook-ing up a $1 billion “advanced manufacturing fund” to support American jobs. There’s no word yet on which companies it will seed, but the iPhone maker will be partnering with a tech company later this month.

Cook also said the fund would support educational programs for jobs of the future, like coding. Over a third of all U.S. jobs could be roboticized by 2030, so Apple’s investment couldn’t come at a better time. We think Steve Jobs would be proud.

 

What Else Is Happening…

 

Economic Calendar


Water Cooler

Hey Alexa, Lets Chat

Amazon’s (-0.37%) Alexa is one of the most common AIs in our daily lives. By opening the platform to developers, hundreds of engineers are working to make talking to robots more and more like a real conversation. Recently released tools allow Alexa to whisper, pause naturally and even show emotion. Whether you think AI is creepy or useful, it’s in high demand:

  • Amazon recently created a grant program, incentivizing teams of university students with a $2.5 million prize. The goal: allow Alexa to hold an actual 20-minute conversation. The “Alexa Prize” will be selected in November.
  • In terms of privacy concerns, Amazon claims that while the recordings are stored online, consumers can delete them. That being said, the company refused to hand over recordings to police earlier this year.
  • Oh, one more thing. A recent study of voice technology users found that over a quarter of them have had sexual fantasies about a voice assistant (Siri and Cortana too, not just Alexa). Again, sex really does sell.

The Breakroom

Weekly Brew Quiz

Think you remember the most important stories from this week? Take the weekly Brew quiz and find out. We’ll randomly select one person from all the correct responses to get a bundle of Brew supplies.

Interview Question of the Day

On a scale of one to 10, how weird are you?

That’s what Zappo’s CEO Tony Hsieh likes to ask applicants. He says it fits with the shoe seller’s culture and lets applicants express themselves. Here’s what he likes to hear.

Stat of the Day

$38 billion—that’s how much a new report says it will cost Amtrak to get its Northeast Corridor (D.C. – New York – Boston) back into shape. We hate to be pessimists, but it’s not looking too likely.


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