In the first quarter of 2022, Buffett and Munger's Berkshire Hathaway spent more than $20 billion to buy oil assets. At the shareholders' meeting held on April 30, the two once again set up an oil platform, and Munger made it clear that the United States should buy oil from the Middle East. A sword is not old, but a good word.
11 days later, the throne of the world's largest market value changed hands. After two years, apple lost its position as the world's largest oil producer in terms of market value, and Saudi Aramco, the world's largest oil producer, became king.
At the close of this Wednesday, Saudi Aramco's market value was close to $2.43 trillion; In contrast, Apple's share price fell 5.2% to $146.5 per share on the same day, with the latest market value of $2.37 trillion, the lowest since November last year.
As early as January this year, Apple's share price hit a record peak of $182, making it the first company in history to break through the market value of $3 trillion. Since then, Apple's share price has fallen nearly 20% until it lost its position as the world's largest market value for nearly two years.
On the other hand, Saudi Aramco's Riyadh listed shares have risen 28% since the beginning of the year to a record 46 Riyals ($12.27). Saudi Aramco overtook apple as the world's most valued company, highlighting the boost to its share price from the recent surge in oil prices. Saudi Aramco is expected to announce record profit levels when it reports first quarter earnings on Sunday. In fact, Saudi Aramco's net profit more than doubled to $110 billion in 2021.
In Q4 of 2021, when Saudi Aramco's market value returned to $2 trillion, Time magazine secretly expected Saudi Aramco to seize the throne of the world's most valuable company from apple, and said that the changes in the stock prices of the two giants reflected the changes in the global economic situation.
Over the past decade, technology companies have undoubtedly been the darling of investors. Low oil prices and low inflation led global central banks to cut interest rates to stimulate the economy in the long exit from the 2008 financial crisis. Coupled with the transformation of consumers to a low-carbon future and the shift of investors to a new technology-based economy, technology stocks are very popular.
However, since this year, the situation has begun to change. Cyclical stocks such as oil are rising, while technology stocks are tumbling. Since 2022, the NASDAQ index has fallen by nearly 28%. As the uncertainty of economic activities further increased, technology companies began to cut spending and formulate layoff plans. Even though Apple's profit in the first three months of this year was better than expected, its share price is still falling.
Saudi Aramco becomes the world's largest market capitalization photo source: Financial Times
The reason behind this is that as the impact of the global epidemic on economic activities begins to weaken, consumers go out of their homes and reduce their spending on home entertainment. In addition, inflation, rising bond yields, interest rate hikes and other factors make investors cautious about holding expensive technology stocks, and the market value of Technology companies such as apple is under pressure.
Apple has always been regarded as a relatively safe technology stock, but even with stable growth and good book value, it is difficult to escape a series of effects caused by geographical conflicts, epidemic blockade, inflation and other factors. Many technology stocks and other companies with high P / E ratios have had panic selling in varying degrees, and most of the funds flowing out of them have also gone to energy stocks.
Energy giants such as Saudi Aramco benefit from it, especially when investors are worried that the conflict between Russia and Ukraine may lead to the interruption of Russian oil supply. In addition to the black swan incident such as the Russian Ukrainian conflict, in the long run, in the post epidemic era, fossil fuels are re establishing their vital position in all aspects of daily life, and the future through the purchase of science and technology stocks is giving way to the current dilemma: from food to travel, the rise of energy costs has affected all aspects of life.
This year, oil prices soared by a record. In March, oil prices rose to $139 a barrel, a 14 year high. Supported by the rise in Brent crude oil prices, S & amp; The P 500 energy sector has soared by about 40% this year. Western oil is this year's S S & amp; P 500's best performing stock rose 107%. As mentioned earlier, Berkshire's heavy energy sector is the western oil company.
In an interview with Bloomberg, James Meyer, chief investment officer of Tower Bridge advisors, said: "in terms of business or fundamentals, you can't compare apple with Saudi Aramco, but the outlook in the commodity sector has improved. They are the beneficiaries of inflation and tight supply."
On the other hand, rising energy costs have also led to high inflation, forcing the fed to raise interest rates at the fastest rate in decades. The increase in interest rates depressed the discount rate, and investors correspondingly lowered the valuation of the future income flow of technology companies, thereby driving down their share prices. Even in the medium to long term, as inflation remains high, investors are still worried that the Fed will be more aggressive, which has accelerated their shift to more conservative cyclical stocks.
In an interview with Bloomberg, Ingalls & amp; Tim Ghriskey, senior portfolio strategist at Snyder, said that given that the Fed will further raise interest rates by at least 150 basis points this year and the prospect that the conflict in Ukraine has not been resolved, it may take some time for technology to regain its dominance.
In addition to the changes in the capital market, the technology industry itself has also encountered certain difficulties, the most prominent of which is the supply chain problem, which has become a major concern for investors in the short term. Luca Maestri, Apple's chief financial officer, said at the first quarter earnings conference: "the supply constraints caused by the interruption related to the COVID-19 and the industry wide silicon shortage are affecting our ability to meet customers' demand for our products."
Last month, apple warned of huge losses related to the current situation, saying that production and logistics problems could affect its sales of $4 billion to $8 billion this quarter.