The year-over-year (YoY) increase in inflation in October was 2%, slightly below the 2.2% YoY increase in September, as the cost of gasoline and fuel oil eased after the hurricane-related production glut.
Price declines of new cars accelerated from -1% in September to -1.4% in October, while the price decline in used cars slowed from -3.7% to -2.9%. Our auto-related stocks, including Gentex (GNTX) and Magna (MGA), are likely to see continued pricing pressure from their OEM customers, but solid profit margins at both the companies will provide enough cushion for any adverse pricing pressure.
Retail sales rose 4.6% in October YoY, and 0.2% from September (MoM), mainly due to hurricane-related retail purchases in automobiles. Furniture sales rose 0.7% MoM while the purchase of building materials decreased -1.25% MoM. We will continue to keep an eye on our retail stocks, including Signet Jewelers, William-Sonoma, Home Depot, Big Lots, Lowe’s and Ross Stores, as the retail landscape is continuously changing from brick and mortar to e-commerce. Our focus will remain on retail stocks that will be immune to the changing industry landscape.
Berkshire Hathaway (BRK) is the only one of our stocks to report earnings in the past week, and there was no major news related to any of our other recommendations.
Berkshire Hathaway (BRK 182.30)
Berkshire announced an insurance underwriting loss of approximately $1.4B in the third quarter due to three major hurricanes (Harvey, Maria and Irma) and an earthquake in Mexico. This loss was offset by $2B of operating income in railroad operations, $2.03B in other business and $1.04B in insurance income. Berkshire increased its stake in Bank of America (BAC), Apple (AAPL), Monsanto (MON) and Synchrony Financial (SYF), while decreasing its stake in International Business Machines (IBM), Wells Fargo (WFC) and Charter Communications (CHTR), according to its 13-F filing. Continue to hold BRK until it reaches my price target price of 200. HOLD.
