Warren Buffett’s Berkshire Finally Pulled The Trigger On A New Deal

Plus, Goldman Sachs and Citi issued new forecasts for the market and economy, Regeneron is beginning a phase 3 trial of its coronavirus antibody cocktail, the FDA issued emergency use authorization for Becton Dickinson’s 15-minute coronavirus test, and Uber has officially agreed to acquire Postmates. 

Stocks were higher to start Monday with the Dow gaining 300 points, or 1.2%. The S&P 500 added 1.3%, while the Nasdaq rose 1.8% to a new all-time high.

Even as stocks soared higher this morning, both Goldman Sachs and Citi were out with tough forecasts today. Citi said that global equities will be roughly unchanged from their current position this time next year as bullish and bearish camps cancel each other out in a sort of “stalemate.” “We would not chase markets higher from current levels,” Citi strategists wrote in their quarterly global equity report. “We would prefer to wait for the next dip.” Meanwhile, Goldman Sachs said that rising coronavirus cases will limit growth in the U.S. economy in the third quarter. “The sharp increase in confirmed coronavirus infections in the U.S. has raised fears that the recovery might soon stall,” said Jan Hatzius, Goldman’s chief economist, in a note. “Although a significant part of the increase reflects higher testing volumes… a broader look at the CDC criteria for reopening shows that not only new cases but also positive test rates, the share of doctor visits for COVID-like symptoms, and hospital capacity utilization have deteriorated meaningfully in the last few weeks.” Goldman also said that it expects U.S. stocks will underperform against their global competitors as the country “underperforms in the near term as it partly reverses its overly hasty reopening in the consumer sector.”

Some states in the U.S. continued to report record new cases of the coronavirus over the holiday weekend as the nation inches closer to 3 million confirmed cases of the deadly virus. Florida and Texas faced a surge of new cases as state and local governments struggle to gain the upper hand over outbreaks that are spiraling out of control. “It’s clear that the growth is exponential at this point,” said Miami Mayor Francis Suarez on Sunday. “We’ve been breaking record after record after record over the last couple weeks. There’s no doubt that when we reopened, people started socializing as if the virus didn’t exist. It’s extremely worrisome.” The concerning rise in cases prompted one infectious disease expert said this morning that the U.S. needs a unified approach to tackle the outbreak and warned that people shouldn’t get a false sense of security that a vaccine is just around the corner. “What we are seeing, certainly, is this virus (is) spreading across the states like a wildfire,” said Joshua Barocas, an assistant professor of medicine at Boston University and an infectious diseases physician at the Boston Medical Center. “What we actually need is a comprehensive, unified approach to this. We need people at all levels of government and society backing up one strategy – and that strategy, really at this point, while we’re waiting for effective vaccines, effective treatments, we need this to be a preventive strategy.”

In other coronavirus news, Regeneron shares are up this morning after the biotech said this morning that it has begun late-stage clinical trials to assess the effectiveness of its antibody cocktail in preventing and treating COVID-19. The phase 3 trial will be conducted across 100 sites and is expected to enroll 2,000 patients in the U.S. “We are running simultaneous adaptive trials in order to move as quickly as possible to provide a potential solution to prevent and treat COVID-19 infections, even in the midst of an ongoing global pandemic,” said Regeneron chief scientific officer Dr. George D. Yancopoulos.  Elsewhere, the FDA has granted emergency use authorization to Becton Dickinson for a COVID-19 antigen test that can be administered at the point of care and produce results within 15 minutes. “This will be a game-changer for frontline healthcare workers and their patients to be able to access a quick diagnostic test for COVID-19, offering results in real-time at convenient locations like retail pharmacies, urgent care centers, and doctors’ offices,” said Dave Hickey, president of Becton Dickinson’s integrated diagnostic solutions business.

Warren Buffett’s Berkshire Hathaway finally pulled the trigger on a deal. The conglomerate will buy Dominion Energy’s natural gas transmission and storage assets in a deal that totals nearly $10 billion. When the deal closes in the fourth quarter, Berkshire’s energy subsidiary will gain ownership of 7,700 miles of natural gas pipelines, vast storage facilities, and a 25% stake in a liquified natural gas export, import, and storage site in Maryland. “We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Berkshire chairman Buffett said in a statement. “This premier natural gas transmission and storage business has been operated and managed in a best-in-class manner,” Berkshire Hathaway Energy’s president and CEO Bill Fehman said.

And Uber has officially bought food-delivery service Postmates for $2.65 billion in stock. The deal brings together the fourth-largest food delivery service in the U.S. with Uber Eats, which trails only DoorDash in market share. The companies said Uber plans to keep the Postmates app running separately, “supported by a more efficient, combined merchant and delivery network.” Uber was previously in talks to buy rival GrubHub, but the deal failed as the companies couldn’t agree on a break-up fee, and Uber grew frustrated with what it perceived as stalling tactics. GrubHub instead sold to European food delivery service JustEatTakeaway last month. 

Stocks We’re Watching

Nu Skin Enterprises (NYSE: NUS): Nu Skin shares gained as much as 26% on Friday after the company released a guidance update that revealed a higher than anticipated top-line figure. Nu Skin said it expects it will book between $603 million to $608 million in revenue for its just-completed second quarter of fiscal year 2020, far above its previous forecast of $520 million to $550 million. “We are pleased to report that our expected revenue for the second quarter is well ahead of our previous guidance, driven by strong global customer growth with particular strength in the Americas and Europe,” said Ritch Wood, chief executive officer. “The trends we are seeing are a credit to the adaptability and hard work of our global sales force and the enduring value of our products. Nu Skin’s investments in technology and our commitment to enhancing the company’s digital capabilities have been a critical driver of performance and business continuity in the second quarter, with online transactions accounting for more than 80 percent of volume.”


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