May 1, 2025

Portfolio Changes: None

Warren Buffett’s Positioning Strategy

The S&P 500 and other major indexes finished up yesterday after slightly negative first-quarter economic growth. Not much movement in Explorer stocks this week except Sea Limited (SE), up 11%.

Chinese exports have recently plunged as the psychology of tariffs takes a toll. China relied on exports for about a third of its economic growth last year.

This weekend, Berkshire Hathaway’s annual shareholder meeting (Woodstock for Capitalists) will take place. This is a chance each year to hear from Buffett and mingle with fellow Buffett lovers from across the world. CNBC will webcast the question-and-answer session in Mandarin as well as English.

Warren Buffett’s Berkshire Hathaway bought 2.3 billion shares of PetroChina for $488 million in 2002 when Petro China’s market value was about $35 billion. The stock was then trading at 3 times earnings.

Buffett sold 5 years later when Petro China’s market value reached $275 billion.

Here is my take on Buffett’s overall strategy.

Seek Quality: Look for companies with durable competitive advantages such as strong balance sheets, consistent earnings, and high returns on equity.

Find Value: Hunt for stocks trading below intrinsic value due to the market or temporary issues.

Identify Catalysts: To unlock value confirmed by momentum, identify stocks with positive price trends and relative strength. Momentum confirms market conviction and the dreaded “Value Trap.”

Berkshire now holds more cash than ever, with over $167 billion on hand, primarily in short-dated U.S. Treasury bills. Buffett is clearly on the cautious side but has been adding to his position in Occidental Petroleum (OXY) to complement his position in Chevron (CVX) as energy stocks make up about 10% of the portfolio.

He also has taken positions in defense consumer staples such as Constellation Brands (STZ) and Domino’s Pizza (DPZ).

Overseas, the only stocks I have read about are Japan’s major trading companies.

These moves indicate that his posture currently is defensive, with a focus on hard assets, and leaning international and this is in line with stubborn inflation, higher oil prices, and a weaker dollar. Perhaps it is time for value and international stocks to lead the pack over both growth and domestic stocks?

It is way too early to tell but so far in 2025, the MSCI World Index is beating the S&P 500 by more than 12%.

Even after their recent run-up, international stocks look cheap, trading at about 16 times earnings over the past 12 months and under two times book value. In contrast, U.S. stocks are at roughly 24 times earnings and more than four times book value.

Finally, for all the talk about the power of institutional investors, U.S. households collectively now hold at least $35 trillion in stocks, or 38% of the market, making them the largest owners of American equities, according to Federal Reserve and Goldman Sachs data.

Explorer Weekly Stock Commentary

Below is a brief update on each Explorer stock. Any changes in ratings will be highlighted. This section is all you need to read each week.

Explorer Disrupter Recommendations – need to watch more closely and have a 20% trailing stop-loss in place.

Airbus (EADSF) shares were up 3.8% this week as its CEO announced it would not cover the cost of tariffs for imported aircraft into the U.S. by airlines such as Delta and American. Airbus is working with European authorities to return to a trade agreement dating back to 1979, which mostly exempted civil aerospace from duties. Airbus has been developing a line of fuel-efficient, mid-sized aircraft that are cheaper for airlines to fly. Buy a Half

Agnico Eagle Mines (AEM) shares traded sideways this week as gold prices paused. Don’t be aggressive at current prices, but many believe that Agnico has the highest quality ores and mines in North America. Agnico also has high quality mines in Australia, Finland, and Mexico, with additional exploration projects in Europe and Latin America. Buy a Half

Banco Santander (SAN) posted a first-quarter 19% increase in net profits, comfortably beating estimates.

Profitability was boosted by strong results from the bank’s Spanish retail group and its U.S. digital consumer lending unit. The bank is also projected to return 10 billion euros to shareholders over the next two years via buybacks. The bank is still trading below book value so keep buying. Buy a Half

BYD (BYDDY) shares were down 5.5% this week, giving back the gains from last week despite reporting another strong quarter in which net profits doubled. BYD sells EVs and hybrids from around $10,000 to $150,000 with a steady stream of new or upgraded models. Its hybrids offer a combined battery-and-gas range up to 2,100 kilometers (1,305 miles). BYD also has a footprint in Morocco and Mexico, two countries with free trade agreements with the U.S. and the EU. Buy a Half

Dutch Bros (BROS) shares were off 2% this week and while the stock’s momentum has slowed it has several tailwinds behind it. The fast-growing drive-through coffee store chain recently raised its long-term store opening goal to 7,000 stores, its comparable sales growth is accelerating, more scale is leading to higher margins, and new mobile ordering is boosting sales. Hold a Half

Luckin Coffee (LKNCY) shares were down 2% after last week’s 9% gain despite posting a great quarter. Revenue increased 41% on a year-over-year basis. New store openings were 1,757, comprising 1,743 stores in China (including 5 stores in Hong Kong), 6 stores in Singapore and 8 stores in Malaysia. Total stores reached 24,097 stores and store-level operating profit was up 245%. Buy a Half

Sea Limited (SE) shares were up 11.3% this week as the company announced it will report earnings on May 13.The company is doing well in all three of its market segments and has a healthy balance sheet. Hold a Half

Subaru (FUJHY) shares were up 3% again as tariff issues cloud the future of the stock despite that the company makes most of its vehicles it sells in America and its stock sells for only five times trailing earnings and about 70% of book value. Buy a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

DBS Bank (DBSDY) shares were steady this week following last week’s 7.7% gain. No news this week for Southeast Asia’s biggest bank by assets and the largest constituent of the Singapore Straits Times Index. Buy a Half

International Business Machines (IBM) shares were off 1% this week as the company announced plans to spend $150 billion over the next five years in the United States to accelerate its quantum computing initiative. This includes $30 billion for research and development and the balance for manufacturing capacity for mainframe and quantum computers. Buy a Half

Visa (V) shares were up 3.3% as the company beat second-quarter earnings estimates and announced a $30 billion share buyback program. Visa’s cards and products are accepted by over 150 million merchants. Buy a Half

Watch List – Stocks we like but do not follow day-to-day

ConocoPhillips (COP), Franco-Nevada (FNV), MOOG (MOG-A)

Explorer ETF/Fund Positions

Grayscale Bitcoin Trust (GBTC) offers investors a way to track very closely to the day-to-day or “spot” movement of bitcoin prices. For aggressive investors comfortable with volatility. Buy a Small Allocation

JPMorgan Equity Premium Income ETF (JEPI) offers double-digit yield coming from both option premiums and dividends using a value-focused strategy. Buy a Full

Morgan Stanley China A Share Fund (CAF) offers exposure to a basket of top Chinese-listed stocks. Buy a Half

Oberweis Micro-Cap Fund (OBMCX) fund stands out for several reasons. The fund’s sound investment process and strong management team earns it a rare Morningstar Medalist Rating of Gold. Over the past five years it has posted an impressive average annual return of 21.1%. Buy a Half

Sprott Platinum and Palladium ETF (SPPP) offers direct exposure to both platinum and palladium which are selling at a sizable discount to gold offering potential upside appreciation. Buy a Half

Stoxx Europe Total Market Aerospace & Defense (EUAD) tracks an index of top defense contractors including Leonardo, Rheinmetall, and BAE Systems. Buy a Half

VanEck Junior Gold Miners ETF (GDXJ) is a basket of junior miners that has 84 positions with the top 10 accounting for 44% of total assets. Half of the stocks are Canadian, 21% Australia, and 7% from South Africa. BUY A HALF

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest quality emerging market stocks. Buy a Half

Explorer Stocks Summary

Brief company summaries that will not change week to week.

Airbus (EADSF) has gained market share by beating Boeing to develop a line of fuel-efficient, mid-sized aircraft that are cheaper for airlines to fly. Boeing is one of only two manufacturers, along with rival Airbus (EADSF), that make the full-size commercial jets needed by the world’s airline industry. China’s COMAC is making gains but is probably a decade away from being a competitive rival. Boeing’s troubles and the U.S.-China trade battle are Airbus’s opportunity.

Agnico Eagle Mines (AEM) follows a conservative strategy and with a history spanning more than 60 years, and now operates a sizable portfolio of 11 assets located in four countries. Management forecasted gold production of approximately 3.45 million ounces in 2024. The company estimates it has about 54 million gold ounces of proven and probable reserves. Furthermore, Agnico Eagle has paid a dividend for 41 consecutive years with a dividend compounded growth rate of 23% per year since 2005 and paid a dividend of $1.60 per share in 2024.

Banco Santander (SAN) was founded in Spain in 1857. The bank’s U.S. headquarters is in Boston, but its strength lies in Latin America and Europe where it has more than 8,000 branches with 171 million customers as well as 58 million digital accounts. About 55% of deposits and loans are in Europe with the balance in Latin America. In its most recent quarter, Santander’s revenue was up 8% while net profits increased 16%.

BYD (BYDDY), in both 2021 and 2022, more than tripled sales from the previous year. That’s hyper growth and including hybrids, BYD has already surged past Tesla in terms of sales. Most of BYD’s sales are still in China but it has a big international expansion underway, including in the U.S., Europe, and Asian markets. BYD is the world’s largest EV battery maker and with CATL and others, is working on sodium-ion batteries. Much less energy dense than lithium batteries, sodium batteries should be much cheaper. BYD will also launch a next-generation Blade battery in 2025, with longer range and faster charging. That, along with various other models, could help rev up BEV sales growth next year. BYD expects solid-state batteries for high-end models by 2027, but not fully reaching lower-end models until 2030-2032.

Watch List: ConocoPhillips (COP) is a global energy industry giant and one of the largest independent exploration and production (E&P) companies in the world, as measured by production levels and proved reserves. The company, founded in 1917 and based in Houston, has operations in 13 countries, although almost half the company’s production is derived from U.S. sources.

DBS Bank (DBSDY) is one of the largest banks in Southeast Asia with a presence in 19 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. The Government of Singapore established DBS in July 1968 and its largest and controlling shareholder is Temasek Holdings, which is one of two large sovereign wealth funds controlled by the Government of Singapore. DBS has assets of roughly $750 billion and a growing presence in the three key Asian areas of growth, which it defines as Greater China, Southeast Asia, and South Asia, meaning India. It is the largest and strongest bank in Southeast Asia and the leading consumer bank in both Hong Kong and Singapore.

Dutch Bros (BROS) is an operator and franchisor of drive-through coffee stores, with 982 stores as of the end of 2024, including 32 that it opened in the quarter. It’s expanding at a steady pace, expecting to add more than 150 new stores in 2025, and it now envisions up to 7,000 stores over the next 10 to 15 years.

Watch List: Franco-Nevada (FNV) is a company with more than half of its revenue coming from gold, but it also offers exposure to platinum, silver, and oil and gas. Franco-Nevada’s focus on royalties and streaming reduces risk and enables it to sidestep the huge capital costs that impact traditional miners. It enjoys cash flow and profits as its mining partners finance and complete exploration and expansion projects. That cash flow enables it to invest in new deals, pay a dividend, and operate debt free. Franco-Nevada has increased its dividend each year since its IPO in 2008.

International Business Machines (IBM) is a blue-chip artificial intelligence (AI) and India play with a nice dividend yield. Known as “Big Blue,” IBM now primarily helps businesses and governments manage their information technology in the cloud era. The stock sells at a discount to the S&P 500 multiple and the information technology sector’s forward earnings multiple. IBM has paid a dividend every quarter since 1916 and has had 29 consecutive years of dividend increases.

Luckin Coffee (LKNCY) is a leading purveyor of coffee and specialty drinks in China. The price of a cup of Starbucks coffee is more than double that of Luckin coffee. In addition, Luckin is adept at adapting to local tastes and launching new products that broaden the market. For instance, it brings to market about 60 new products each year, offering a new drink every week. Its new coconut latte sells nearly $140 million worth annually. All this shows in the numbers as Luckin’s latest quarter revealed strong sales and store count growth.

Watch List: Moog, Inc.(MOG-A) supplies advanced primary flight controls on the most modern military aircraft. That includes the Lockheed Martin F-35 Lightning II and the Future Long Range Assault Aircraft program. The company’s major platforms include the 787, A350, Joint Strike Fighter (F-35 Lightning II). The company also supplies primary flight controls for the Boeing 787 and Airbus A350 widebody aircraft, as well as business and regional jets from Embraer (ERJ) and Gulfstream, owned by General Dynamics (GD).

Sea Limited (SE) has three core businesses: 1) digital gaming/entertainment, 2) e-commerce, and 3) digital payments and financial services, known as Garena, Shopee, and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia.

Subaru (FUJHY), based in Tokyo, holds a 10% market share in Japan, making it the third-largest automaker in the country. In America, the Subaru brand has a cult-like following and Subaru’s stock sells for less than five times trailing earnings and about 70% of book value. It also sports a 3.8% dividend yield, has a market value of $13.4 billion and has a strong balance sheet with a net cash position of $7 billion.

Visa (V) doesn’t extend credit but provides the plumbing for financial payments and communications throughout the world. Visa’s financial infrastructure also underpins much of the world’s commerce. The duopoly between Visa and Mastercard is often referred to as one of the best businesses in the world, with insurmountable moats, low operating costs, and plenty of opportunities for unlocking additional value. Visa currently trades at a discount to its archrival MasterCard.

Currently Open

ETFs

Copyright © 2025. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.