?? Macca’s small fries
Would you like small fries with that? ??
Bert and Ernie? They didn’t team up until 1969. Buffett and Munger? Close, but Berkshire Hathaway’s (BRK.A, BRK.B) dynamic duo didn’t meet until 1959. Macca’s and Coke have been going strong together since 1955 and, let’s be honest, that’s the kind of long-term stability we need in our lives right now. It’s chaos out there! ?? But as inflation continues to chew chunks out of our wallets, McDonald’s is starting to feel the squeeze too.
Last week, they said menu prices in the first quarter of 2022 rose 8% in the US compared with the same period the year prior, which helped to offset increases in labour and food costs. Total revenues were up 11% in the quarter, but on the company’s conference call, executives noted that consumers are starting to buy down to cheaper and smaller menu items. Customers are still lovin’ it, but they’re lovin’ the smaller sizes.??
‘Smaller’ products were a feature of Coke’s quarterly earnings, too. The company’s sales volumes fizzed up 8% compared to the year prior as thirsty months returned after the pandemic. ??? But a combination of higher prices and smaller packaging helped stave off the impacts of inflation and drive a small increase in margins. It’s another example of shrinkflation in all its glory. Shrinkflation is generally horrible for consumers who get less for the same price. But for Coke, offering slimmed-down products can be a way to avoid price increases and maintain the perception of affordability on shop shelves.?
And if that fails? Well, Elon has a plan to bring customers back for more…by putting the ‘coke’ back in Coca-Cola. Thanks, Elon, that’s exactly what tired parents want in their kids’ Happy Meal. ?? Ba da ba ba bahhh.
Boeing fails to take off ??
Warren Buffett’s this weekend lambasted Wall Street’s clamber for ‘the crumbs that fall off the table of capitalism’. But the pressure of airlifting quarterly returns has possibly proved a double-edged sword for investors when it comes to legacy of the skies, Boeing (BA), after the company last week again missed earnings expectations.?
The former darling of Seattle, builder of really big planes and the middle class economy, has faced a payload of scrutiny following two fatal plane crashes of their 737 MAX 8 aircraft in 2018 and months later in 2019. And this March, their Boeing 737-800 fell out of Chinese skies, likely sparking fresh scrutiny. So how did Boeing’s sky-high position shift from ‘If it ain’t Boeing, I ain’t going’ to a ‘culture of concealment’? ??
It’s been a turbulent journey for Boeing since their 377 Stratocruiser flew the highway to Hawai’i in 1950s Mad Men style, complete with a bar and buffet dining. Long before Trump bullied from the pulpit to negotiate a cut-price deal of Air Force One planes, which today’s CEO says will likely cost the company US$1.1 billion, Boeing’s story of corporate greed began with a fatal flaw: replacing engineering decisions with financial ones. ?? The first being after Boeing merged with their greatest rival, aerospace and defence contractor McDonnell Douglas when they allowed incoming James McDonnell to take over as CEO, where he accelerated delivery of shareholder returns by axing 48,000 jobs. That decision ominously set the flight path towards the MAX safety failures.?
Boeing's so-called ‘deadly tale of greed’ is laid bare in a Netflix documentary that unravels how the passenger plane pioneer ‘withheld information about potential hazards’ to avoid costly pilot training for their 737 MAX. So while the world looks towards a pilot shortage that may fly into 2030, ???? it could be a while yet before travellers even want to leave on a jet plane…even for olive oil bottle minis.
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Buffett’s been buying the dip ???
Warren Buffett sure knows how to buy a dip!?
Back in 2008, during the Global Financial Crisis (GFC), Buffett splashed around US$16 billion investing in big US companies, which went on to make tens of billions in profit. Now, after years of snoozing on the side-lines waiting for bargains, the Berkshire Hathaway (BRK.A, BRK.B) giant has woken up and has been buying the dip like nobody’s business. ???
At the company’s legendary AGM over the weekend, where investors could pre-game with boats, books and Berkshire themed See’s Candies, Buffett described some of the company’s recent buying spree. In the first quarter of 2022, Berkshire splurged more than US$51 billion from their massive cash pile. Buffett’s shopping list included big stakes in oil companies Occidental Petroleum (OXY) and Chevron (CVX), as well as PC maker Hewlett-Packard (HPE), gamers Activision Blizzard (ATVI) and acquiring insurers Alleghany (Y). ???
With the S&P 500 index down around 14% so far this year, is Buffett trying to time the market? ?? Haha, no. Buffett has long said he never tries to time the market, instead suggesting that ‘the best thing with stocks is to buy them consistently over time’. Buffett stays focused on the value he’s getting for the dollars he’s spending, which happen to sometimes overlap with dips in the market. Buffett told investors ‘We have not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money’.?
The secret, says Buffett, is to stay ready and keep plenty of cash. ?? In his 2022 letter to shareholders he said he wanted Berkshire to be ‘financially impregnable’ and they’ll always hold a lot of cash. ‘It’s like oxygen; it’s there all the time, but if it disappears for a few minutes, it’s all over’.
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.