Daily Brief: SoftBank’s “Vision Fund” Has Lost Sight Of Its Winning Ways

Daily Brief: SoftBank’s “Vision Fund” Has Lost Sight Of Its Winning Ways

over 2 years ago3 mins

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SoftBank reported a quarterly loss on Monday, with the Japanese giant struggling to make out winners for its “Vision Fund” like it used to.

What does this mean?

SoftBank’s Vision Fund – the world’s biggest tech-focused investment fund – has swung between big profits and heavy losses ever since it was launched. Last quarter was decidedly the latter, with nearly $18 billion being wiped off the value of its listed investments. Its stake in South Korean ecommerce company Coupang took a $6.7 billion hit, for one, while its investment in ride-hailing car firm Didi posted a $6 billion loss of its own. And while the fund did turn a profit from selling off stock in DoorDash, that couldn’t stop it from posting a bigger loss than it reported even during the height of the pandemic.

Softbank’s losses
Source: Bloomberg

Why should I care?

For markets: SoftBank’s trying to keep investors on side.

SoftBank’s stock price has fallen more than 40% since March, which – according to the CEO – means the company is now worth less than half as much as its own portfolio of investments. That can’t be great for its ego, but at least it’s trying to keep investors happy: the company announced on Monday that it would be buying back 15% of its own shares available on the market, which will reduce their supply and, in turn, push up the price of those left over.

Softbank stock
Source: Google Finance

For you personally: Easy come, easy go.

Share buybacks don’t always result in higher share prices, mind you: some companies – particularly tech firms – issue new shares to employees on a regular basis to keep them motivated. As an investor, then, you’ll want to do your research into how many shares the company in question is doling out to employees – otherwise you risk seeing the upside of buybacks wiped out the moment a flood of new shares arrive.

Keep reading for our next story...

Berkshire Hathaway – Warren Buffett’s Investment Firm – Reported Mixed Results

Berkshire image

Berkshire Hathaway reported mixed quarterly earnings over the weekend, as CEO Warren Buffett twiddles his thumbs till a deal worth making finally pops up.

What does this mean?

Berkshire is such a sprawling conglomerate that it was bound to overachieve in some parts of its business and underachieve in others last quarter, as different economic factors stirred up both tailwinds and turbulence. Its railroad, utilities, and energy segment, for example, grew 11% versus the same time the year before, with post-pandemic demand continuing to rebound. Its insurance business, on the other hand, had plenty of payouts to make following Hurricane Ida and the European floods, bringing the segment to a loss. The company’s stock market investments were a mix of both: they brought in almost $4 billion, sure, but that was down around 80% from the same time last year. All in all, the good couldn’t outweigh the bad: Berkshire's total profit came in 60% lower than the same time a year ago.

Berkshire buybacks

Why should I care?

The bigger picture: Berkshire has too much cash.

Berkshire’s hasn’t made any sizable acquisitions for a few years, mostly because it’s been put off by record-high stock valuations. So the company’s instead been spending the cash it’s saved on buying back its own shares, including another $8 billion worth last quarter. But even that’s barely made a dent in its cash pile: it ended last quarter with a record-high $149 billion.

Berkshire cash
Source: Bloomberg

For markets: Is Buffett behind the times?

Warren Buffett has cultivated his messianic investing reputation for a reason: between 1965 and 2020, his firm’s investments generated an average return twice as much as the US stock market every year. Focus on the last five years, though, and you’ll see it’s slipped behind the wider market, which could be because Berkshire’s preferred “value stocks” – those that look cheap relative to the market – have been underperforming their expensive, fast-growing equivalents.



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