The Fourth Turning Is Now Raging

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This is Porter & Co.’s Sunday Investment Chronicles. Every week, the Porter & Co. research team pores over thousands (and thousands) of articles, reports, social media posts, analyses, regulatory filings, and anything else we can get our hands (and eyes) on to understand what’s happening in the world of investing and finance – and to uncover the most original, compelling, and double-head-fake ideas…

… and we curate the best of those here. We do it all the old fashioned way: Hours of reading and brainpower (no AI curation here). We read everything – for you.

In Case You Missed It

In Monday’s Daily Journal, titled “Buffett’s Wilting Legacy,” Porter commented on the announcement that Warren Buffett would retire as CEO of Berkshire Hathaway after nearly 60 years. He wrote:

Before Berkshire, a lot of people thought of investing as gambling. And most people believed anyone who could beat the market only did so by cheating or stealing, like the 1987 movie Wall Street sought to portray.

But Berkshire changed all of that. Its structure guaranteed investment success while Buffett’s personal reputation made investing respectable. The combination showed, beyond any doubt, that capitalism was more credible and more effective than socialism.”

Porter went on to point out, however, that without having invested in shares of Apple (AAPL), Berkshire’s performance over the last decade would have been fairly mediocre.

Since the financial crisis in 2008, Berkshire has made six major acquisitions… Total initial invested capital: over $100 billion… And, none – not a single one – of these investments has produced a market-beating return.”

Because the 10-year Treasury bond’s price dropped 2.2% between April 2, when Trump’s tariffs were announced, and April 11 – which is a big move in such a short period – Porter turned Wednesday’s Journal over to Distressed Investing editor Marty Fridson.

The selloff was significant, Marty says – and highlighted the higher-than-understood degree of volatility that comes with investing in U.S. Treasures, which are normally viewed as risk-free.

Marty wrote:

Between June 2020 and July 2023 the yield on 10-year Treasuries rose from 0.54% to 5.46%. Anyone who thought those securities were risk-free received a rude awakening when their value dropped 25%.”

Also in Wednesday’s Journal, Porter replied to a reader who said:

selling options caps your upside and leaves you an unlimited downside.”

Porter explained:

Options provide incredible financial benefits to investors who know how to price them. Much like stocks, options are frequently badly mispriced, creating additional opportunities for investors, especially during periods of market panic.

I believe that over the next two to four years we are going to see frequent bouts of substantial market volatility… These are the macro cards we’ve been dealt… But, ironically, that’s the good news… We had a period just like that last month. And, at these moments of panic, you can make incredible returns. I just closed out the puts I sold on Hershey (HSY), which I told you about last week, for a profit of $53,560!”

We will be discussing more trading strategies such as this in the Porter & Co. Trading Club, which we will unveil in a few short weeks.

And on Thursday, Marty Fridson released a new recommendation in the May issue of Distressed Investing, which we also shared with Big Secret subscribers. In this report, Marty and his team recommended a combined bond-stock investment in an ethanol producer that is a leader in a growing industry. Wrote Marty:

We believe its operating profits – which have been weak for the last few years – are in the early stage of a multi-year rebound. As we see it, investors are not appreciating the turnaround that is underway.”

Also on Thursday, Biotech Frontiers editor Erez Kalir released two new recommendations – negative-EV stocks that he plucked from his biotech watchlist. Erez wrote:

What could provide a greater margin of safety than buying a company at a price of, say, $4 per share when the company has $8 per share of net cash on its balance sheet? Our $4 outlay is therefore covered twice over while we get the company’s intellectual property for free. That’s exactly the type of opportunity the biotech sector is giving us today.”

And, finally, in Friday’s Daily Journal, Porter wrote about what he considers Warren Buffett’s biggest investment mistakes, saying, for one thing:

Rather than investing in market leaders, he chose, repeatedly, to buy so-called value businesses, where he could own 100% of the shares. That strategy has been a colossal failure.”

But here’s the good news, Porter concludes:

You don’t have to make these mistakes. Just learn to invest like my dad – in the biggest, most obvious market leaders. If Buffett had just made those easy choices, Berkshire would be more than twice its size today…

That’s a difference of over $700 billion.”

The Best Things We Read Last Week

Out of the hundreds of sources of investment, finance, and economics news and insight we regularly review – our Bloomberg terminal, hedge-fund letters, annual reports, the financial news media, Securities and Exchange Commission (“SEC”) filings, investment newsletters, newspapers, X (Twitter) threads, conferences, podcasts, and more – here’s what we’ve read that we think you might find interesting.