Few ASX shares on the All Ordinaries (ASX: XAO) Index have delivered the kind of returns that DroneShield Ltd (ASX DRO) stock has over the past few months.

Today, the Droneshield share price is trading at $1.44, down 1.03% for the day thus far. But even so, this share price still leaves Droneshield stock with a jaw-dropping year-to-date gain of 277.6% over 2024 so far. Over the past 12 months, this defence share has risen by an even more impressive 524%.

So needless to say, Droneshield investors would be a pretty happy bunch right about now. Check out Droneshield’s incredible stock price trajectory for yourself below:

This monstrous rise in value hasn’t come unprovoked. Droneshield is a stock that has been growing at breakneck speed. Back in April, the company released a quarterly cash flow report, which revealed Droneshield’s revenues for the quarter ending 31 March came in at $16.4 million. That was up a stupendous 925% from the $1.6 million the company reported for the same quarter last year.

So given Droneshield’s stunning recent success, many investors might be wondering whether this company pays out a dividend, perhaps even a fully franked one. So today, let’s dive into what kind of dividends Droneshield stock pays, or at least, has paid, out.

Will you get dividend income from Droneshield stock?

Well, this won’t take long.

Droneshield stock has never paid out a dividend. And it doesn’t look like it will, at least on a short-term horizon.

Most companies only start paying dividends when they are comfortably profitable, and with a business model that has reached some sort of maturity. Remember, every dollar that a company forks out in dividend payments is a dollar it can’t reinvest into its business.

It was only in the 2023 financial year that Droneshield achieved profitability for the first time. The company reported a net profit of $9.3 million for FY2023, up from a net loss of $900,000 for FY2022.

Right now, the company is clearly prioritising growth, with a $15 million capital raising program recently completed.

If Droneshield continues to grow at this stunning rate, I still wouldn’t expect a dividend until it has scaled up to its full potential and is sitting on a comfortable stream of free cash flow with net profits consistently high.

Even so, Droneshield stock owners arguably shouldn’t complain too loudly about this lack of dividend income, considering their lucrative capital gains over just the past six months alone.

The post Does DroneShield stock pay dividends? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) is having a subdued finish to the week. In afternoon trade, the benchmark index is down 0.3% to 7,728.6 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is down 4% to 9 cents. This is despite there being no news out of the lithium miner today. However, it is worth noting that most lithium shares are falling again on Friday following yet another red session for their peers on Wall Street. This latest decline means that Core Lithium’s shares are now down over 90% since this time last year. They have also hit a new multi-year low on Friday.

Deterra Royalties Ltd (ASX: DRR)

The Deterra Royalties share price is down 7% to $4.14. While this mining royalties company has announced a major acquisition, this has been overshadowed by a second announcement. The latter announcement reveals that Deterra Royalties is making a major change to its dividend policy. At present, it pays out 100% of net profit after tax. However, from FY 2025, the company will change its target payout ratio to a minimum of 50% of its profits.

Northern Star Resources Ltd (ASX: NST)

The Northern Star Resources share price is down 3% to $13.30. This follows a reasonably sharp pullback in the gold price overnight which is weighing on the industry today. This has seen the S&P/ASX All Ordinaries Gold index fall by 2% this afternoon. Traders appear to have been selling gold to take profit after a decent run.

Opthea Ltd (ASX: OPT)

The Opthea share price is down 23% to 37.5 cents. This follows news that the retinal disease focused clinical-stage biopharmaceutical company has successfully completed the institutional component of its capital raising. Optea’s institutional entitlement offer raised approximately $161.5 million at a discount of 40 cents per new share. Eligible institutional shareholders took up approximately 61.4% of their entitlements, with the shortfall placed to both new and existing institutional shareholders and to the underwriter. The proceeds from the capital raising will be used to fund the company through the anticipated Phase 3 topline data readouts. CEO Frederic Guerard said: “We appreciate the strong support from our shareholders, and from new investors, who share our belief that sozinibercept has the potential to transform patient outcomes with superior vision gains, which continues to be a significant unmet need in wet AMD.”

The post Why Core Lithium, Deterra Royalties, Northern Star, and Opthea shares are dropping appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

As the S&P/ASX 200 Index (ASX: XJO) slips around 0.3% into the red on Friday, one ASX 200 stock has copped a hammering.

Deterra Royalties Ltd (ASX: DRR) shares took a significant hit at the open and were down 10% in early trade. However, the mining royalty company’s shares have since regained some ground and are trading at $4.18, with a trailing dividend yield of 7.14%.

This morning’s sharp decline followed the company’s announcement of a substantial acquisition and a major change to its dividend policy.

Why is this ASX 200 stock under pressure?

The slide in Deterra Royalties’ stock price came after it announced its new move into the lithium domain. It has made an all-cash offer to acquire UK-based Trident Royalties Plc for $276 million (144 million pounds).

According to the announcement, Trident is a “growth-focused diversified mining royalty and streaming company”, boasting a portfolio of “royalties and offtakes”.

Its portfolio includes 21 royalties and offtake contracts, giving the ASX 200 stock exposure to lithium, gold, silver, copper, zinc, and more. As such, the acquisition marks a pivot towards green metals and away from its traditional iron ore royalties, including those with BHP Group Ltd (ASX: BHP).

Deterra’s offer for Trident is set at 49 pence per share, equal to AUD 93.4 cents per share at the current exchange rate. This represents a premium of 22.5% over Trident’s latest closing price of 40 pence (AUD 76.3 cents).

Trident’s board has unanimously recommended shareholders vote in favour of the acquisition. Key shareholders â€“ representing about 28.7% of Trident’s share capital – have also voted in favour.

If successful, the acquisition will be completed via a UK scheme of arrangement

The market has reacted negatively to ASX 200 stock’s announcements, as seen in the price action today. East 72 fund manager Andrew Brown wasn’t keen on the deal either, suggesting it diluted the value of Deterra’s existing BHP royalties.

He expressed scepticism about the move into lithium, implying it might turn a “brilliant asset into a terrible company”, according to the Australian Financial Review.

“Have somebody cash the cheque and buy back stock. If the royalty is worth buying, Franco Nevada will buy it first”, he added. “I don’t hold Deterra, but wish I could and hope an activist [investor] comes along”.

Dividend policy changes and market reaction

In addition to the acquisition news, Deterra announced changes to its dividend policy. Previously, the company had a 100% net profit after tax (NPAT) payout ratio.

The FY 2024 final dividend will remain the same. However, moving forward, Deterra aims for a minimum payout ratio of 50% of NPAT. This change aims to balance capital growth with income returns.

It will also implement a dividend reinvestment plan (DRP). The DRP will allow its investors to automatically invest dividends received without incurring brokerage fees.

Deterra managing director Julian Andrews had this to say:

While consistent with our well established and overarching capital management strategy, today’s adjustment to our dividend policy is designed to better align it with Deterra’s targeted longer-term balance between capital growth and income returns.

Importantly, our discipline to return capital when not required for investment or balance sheet management remains unchanged.

Deterra has returned more than $480 million to shareholders as dividends since its listing towards the end of 2020.

The post ASX 200 stock nosedives 10% on new lithium play appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week in the red. At the time of writing, the benchmark index is down 0.3% to 7,726.9 points.

Four ASX shares that are not letting that hold them back today are listed below. Here’s why they are rising:

Boss Energy Ltd (ASX: BOE)

The Boss Energy share price is up 3% to $4.21. This morning, this uranium miner announced that production has started at its US-based Alta Mesa In-Situ Recovery (ISR) Central Processing Uranium Plant and Wellfields. Boss Energy’s managing director, Duncan Craib, said: “The start of production at the Alta Mesa Project is another key milestone in the implementation of our strategy to be a global uranium supplier with a diversified production base in tier-one locations.”

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price is up 4% to $1.36. Investors have been buying this small business lender’s shares this week after S&P Dow Jones Indices announced that it will be added to the ASX 200 index next week. Judo Capital will replace building materials company CSR Ltd (ASX: CSR) when it is removed from the index. Though, this remains subject to shareholder and final court approval of the scheme of arrangement which will see CSR acquired by Compagnie de Saint-Gobain.

Life360 Inc (ASX: 360)

The Life360 share price is up 5% to $15.01. This follows a strong night of trade for the location technology company’s Nasdaq listed shares. After a reasonably lukewarm start to life on Wall Street, the company’s shares finally took off overnight and rose by 6%. The good news is that there could still be plenty more gains to come. Earlier this week, Bell Potter put a buy rating and $17.00 price target on its shares. This implies potential upside of 13% for investors from current levels.

Paladin Energy Ltd (ASX: PDN)

The Paladin Energy share price is up over 1% to $14.30. This appears to have been driven by the release of a broker note out of Citi. According to the note, the broker feels that recent share price weakness due to a pullback in uranium prices has created an attractive entry point for investors. As a result, its analysts have reaffirmed their buy rating and $17.00 price target on the uranium miner’s shares. This suggests that Paladin Energy’s shares could rise by approximately 19% over the next 12 months.

The post Why Boss Energy, Judo Capital, Life360, and Paladin Energy shares are pushing higher appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Broadcom (NASDAQ: AVGO) stock has been riding the tech wave higher all year. But shares broke out this week after the company released fiscal 2024 second-quarter results. The stock has surged this week by about 20% as of Thursday afternoon trading, according to data provided by S&P Global Market Intelligence.

That has led to a more than 50% gain in Broadcom stock so far this year. Shareholders can thank both the artificial intelligence (AI) boom as well as Broadcom’s nearly $70 billion acquisition of VMware that closed late last year.

AI infrastructure winner

Even prior to Broadcom’s earnings announcement, the stock had pushed more than 6% higher this week. That’s because investors are beginning to grasp just how broad spending has become for AI-related products.

As data center construction explodes to harness the compute power needed for the many AI use cases, Broadcom is increasingly benefiting from the related infrastructure needs. That includes switching solutions for high-performance connectivity, server storage products, and other wired and wireless connectivity needs.

Last year, as OpenAI’s ChatGPT launch exemplified how broad the use of generative AI can become, Broadcom senior vice president and general manager Ram Velaga said, “It is clear that artificial intelligence, machine learning, and automation have been growing exponentially in use — across almost everything from smart consumer devices to robotics to cybersecurity to semiconductors.”

Broadcom’s latest quarterly results show how that is playing out. The company reported record revenue from AI products of more than $3 billion. Total revenue of $12.5 billion increased by 43% year over year. Also contributing was growing adoption of VMware cloud software stack solutions.

Management boosted its full fiscal year revenue expectations by 2% to $51 billion, and also sees higher profitability from that revenue. As Nvidia did last month, the company also announced a 10-for-1 stock split that will be implemented next month. While that doesn’t affect the valuation of the company, it does show management has confidence that Broadcom’s strong business results are likely to continue. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Which ‘other’ US AI stock is soaring this week? appeared first on The Motley Fool Australia.

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Howard Smith has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It won’t be long until we see Guzman y Gomez stock trading on the ASX boards.

As we covered here earlier this week, the company is preparing for an initial public offering (IPO).

The quick service restaurant (QSR) operator is aiming to raise around $242.5 million by offering 11.1 million shares priced at $22.00 each. This will ultimately give the company a $2.2 billion valuation at listing.

But is this excessive? Does it make Guzman y Gomez stock too expensive? Let’s find out.

Is Guzman y Gomez stock too expensive?

Tamim, an Australian Share Fund managed by Ron Shamgar, has been running the rule over the IPO.

The fund manager highlights that the company has taken its lead from popular Mexican QSRs like Chipotle (NYSE: CMG) in the United States, but attempts to differentiate itself by using fresh ingredients and its diverse range of restaurant formats and ordering channels.

However, Tamim has called the company’s proposed $2.2 billion valuation as “eye-watering” and notes the significant premium that Guzman y Gomez stock will trade at compared to Collins Foods Ltd (ASX: CKF) and Domino’s Pizza Enterprises Ltd (ASX: DMP). It commented:

The IPO values GYG at an enterprise value to operating earnings multiple of 32.5 times, significantly higher than Domino’s Pizza at around 18 times and Collins Foods Limited at just over 14 times. This rich valuation has raised concerns, especially when compared to the global fast-casual Mexican chain Chipotle, which trades at a multiple of 45 times despite its stronger growth and brand recognition.

But there’s more to this valuation than meets the eye, highlights Tamim. This relates to how Guzman y Gomez treats its lease liabilities. It adds:

However, a controversy has emerged around GYG’s treatment of lease liabilities in its valuation. Critics argue that by excluding $210 million in lease costs from its operating earnings calculation, GYG can present a much higher estimate of 2025 operating earnings in an attempt to justify a richer valuation multiple. Properly accounting for leases could result in GYG being valued significantly higher on an earnings before interest and tax (EBIT) or a price to earnings ratio.

Should you invest?

In light of the above, the fund manager appears to believe investors should keep their powder dry and wait for a better entry point once the IPO excitement dies down. It concludes:

While GYG’s growth ambitions are impressive, investors would be wise to approach this IPO with caution. The rich valuation in comparison to other QSR players raises questions about whether the hype surrounding the offering is justified. The controversy around GYG’s treatment of lease liabilities, which could significantly understate its true leverage if properly accounted for, adds further uncertainty.

History has shown that many high-profile IPOs struggle to live up to their lofty expectations once the initial excitement fades. Rather than getting caught up in the frenzy, prudent investors may be better served by waiting on the sidelines to see how GYG’s growth story unfolds as a public company. Only then can the true merits of the business be evaluated without the distortions of IPO pricing and promotions. A cautious “wait-and-see” approach could pay dividends for those seeking to invest in GYG for the long haul.

The post Is Guzman y Gomez stock too expensive? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Collins Foods and Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Chipotle Mexican Grill and Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Chipotle Mexican Grill, Collins Foods, and Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Three S&P/ASX 200 Index (ASX: XJO) shares just earned substantial broker upgrades.

One is involved in cutting-edge medical treatments.

One runs Australia’s biggest lotteries.

And the third is a major iron ore producer.

Which ASX 200 shares are we talking about?

Read on!

(Broker data courtesy of The Australian.)

Three ASX 200 shares with boosted outlooks

The first ASX 200 share getting a sizeable broker upgrade is Champion Iron Ltd (ASX: CIA).

Shares in the iron ore miner are down 1.8% today, trading for $6.39 apiece. That leaves the Champion Iron share price up 3% over 12 months. Champion Iron shares also trade on a 2.4% unfranked trailing dividend yield.

CSLA believes there’s some strong potential for share price gains ahead. The broker raised Champion Iron to a buy rating with a $7.90 price target. That’s almost 24% above current levels.

The most recent price sensitive news from the company was released on 31 May. In a promising growth sign, the miner reported record-high earnings before interest, taxes, depreciation and amortisation (EBITDA) of C$553 for FY 2024. That was up 11% from FY 2023.

Which brings us to the second ASX 200 share scoring a broker upgrade, the Lottery Corp Ltd (ASX: TLC).

Shares in Australia’s biggest lottery company are up 0.8% today at $5.17. That sees the Lottery Corp share price up 2% over 12 months. Lottery Corp shares also trade on a 2.7% fully franked dividend yield.

Macquarie has a positive outlook for the stock.

The broker raised Lottery Corp to an outperform rating with a $5.50 price target. That’s more than 6% above the current share price.

The company could be set to benefit from the stage three tax cuts and new costs of living relief measures contained in the federal budget, which will see most Aussies pocketing significantly more money in the year ahead. Undoubtedly some of us will dip into that extra cash in hopes of turning it into millions with a winning lottery ticket.

Rounding off the list of ASX 200 shares receiving a significant broker upgrade is Telix Pharmaceuticals Ltd (ASX: TLX).

Shares in the biopharmaceutical company are down 0.3% today, changing hands for $16.41 apiece. The Telix Pharmaceuticals share price remains up an impressive 49% over 12 months.

And Bell Potter believes there are more outsized gains to be reaped.

The broker raised Telix Pharmaceuticals stock to a buy rating with a $19.00 price target. That represents a potential upside of almost 17% from the current share price.

Telix has achieved a number of commercially significant milestones with its medical products over the past few months. And the stock could substantially benefit with the rapid advance of AI helping to streamline clinical testing and new drug development.

This morning the ASX 200 share announced that it was pulling out of its intended initial public offering (IPO) on the Nasdaq. Judging by the muted share price reaction, management may have made the right call in pulling the plug after the Telix share price has surged 62% on the ASX in 2024.

The post Why these 3 ASX 200 shares just earned substantial broker upgrades appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lottery, Macquarie Group, and Telix Pharmaceuticals. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

South32 Ltd (ASX: S32) shares have been popular with investors throughout 2024 and have advanced more than 10% this year.

Volatility in commodity prices and a surge in metals demand from the electrification ‘megatrend’ are two tailwinds behind companies like South32 in the basic materials sector.

South32 shares are trading at $3.65 each at the time of writing after a broker upgraded the miner to a buy due to recent strength in commodity prices. Here’s a look.

Why UBS upgraded South32 shares

UBS has raised its earnings projections for South32 by 13% to 34% for the 2024 to 2026 financial years. This is due to higher prices for manganese and alumina – two critical metals used in the production of ceramics, gasoline, steel and aluminium.

UBS mining analyst Lachlan Shaw said the firm was bullish on South32 as prices of these metals begin to stretch higher.

“Prices across South32’s commodity basket are now a strong tailwind to earnings and free cash flow optionality,” Shaw told the Australian Financial Review.

At the time of writing, the price of Manganese ore has shot to 42.50 CNY/mtu from a low of 29.144 CNY/mtu on 1 January.

Meanwhile, according to the London Metals Exchange, alumina prices were USD $498 per metric tonne on 13 June, up from USD $332/mt in December 2023.

The broker has increased its price target for South32 shares to $4.15 from $3.90, which represents a 14% upside potential at the time of writing.

Other broker insights on South32

Macquarie has also shown optimism about South32 shares, especially due to its copper exposure. According to my colleague James, in late May, Macquarie reaffirmed its outperform rating on South32 shares with an upgraded price target of $4.25. This suggests a potential upside of nearly 16% based on the current share price.

Furthermore, in a May note, Goldman Sachs maintained a buy rating on South32 shares. Despite minor adjustments to its FY 2024–2026 earnings before interest, tax, depreciation, and amortisation (EBITDA) estimates, Goldman Sachs raised its 12-month price target for South32 to $4.00.

It highlighted the company’s improving free cash flow (FCF) and attractive valuation. “We forecast ~US$550mn of FCF in the June half,” its analysts noted. Goldman also emphasised the positive outlook for key commodities like copper, aluminium, zinc, and metallurgical coal.

South32’s strong financial outlook is a key reason for these positive broker ratings, in my opinion. Higher commodity prices have significantly boosted the company’s earnings and free cash flow projections, which could help fund dividends and share repurchases.

UBS’s Lachlan Shaw also mentioned that a restart of the company’s buyback program at the FY 2024 results “cannot be ruled out”, according to the AFR.

Why South32 shares might be worth watching

The recent upgrades from UBS, Macquarie, and Goldman Sachs show a strong positive sentiment towards South32 shares.

With improved commodity prices and robust financial performance, the company might be positioned well for growth. Just remember to consider your own personal financial circumstances and to conduct your own due diligence.

The post See why this broker just upgraded South32 shares to a buy appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has built a reputation as a master of traditional value investing. His approach, which involves identifying undervalued companies with strong fundamentals and holding them for the long term, has proven successful for decades.

However, as the world stands on the cusp of an artificial intelligence (AI) revolution, it’s worth examining whether Berkshire Hathaway’s stock portfolio is adequately prepared for the potential disruption.

This analysis is rapidly becoming an urgent necessity, as AI is poised to enter a period of unprecedented, exponential growth. The convergence of advancements in computing power and the massive influx of capital, with tens of billions of dollars being invested in AI-capable data centers, is set to propel AI development forward at a breakneck pace in the next 18 months.

Buffett has rarely been a fan of cutting-edge tech

Buffett’s stance on cryptocurrencies, particularly Bitcoin, has been unequivocal. In 2018, he famously described Bitcoin as “probably rat poison squared” and expressed his belief that cryptocurrencies would “come to a bad ending.”

While his skepticism toward Bitcoin may be warranted, it raises questions about his outlook on the broader technological landscape, including AI.

The AI revolution promises to bring about profound changes across industries, with the potential for both direct and knock-on effects that prove to be disruptive. For instance, the insurance industry, a key area of focus for Berkshire Hathaway, could undergo substantial transformations as AI improves risk assessment and automates claims processing. It also faces disruptions from the advent of an array of autonomous vehicles.

Moreover, the financial sector, which forms a significant portion of Berkshire Hathaway’s portfolio, may be particularly vulnerable to AI-driven disruption. As AI algorithms become more sophisticated, they could potentially replace human analysts and traders, creating both new opportunities and novel risks for the sector.

Berkshire Hathaway’s significant exposure to the energy sector is another area of concern in the age of AI. For example, AI-driven advancements in renewable energy, smart grid technologies, and autonomous green vehicles, among others could significantly diminish the earnings power of traditional oil and gas companies by the decade’s end, negatively impacting the value of Berkshire Hathaway’s holdings in this sector.

Berkshire Hathaway does have an AI hedge

However, it’s important to note that Berkshire Hathaway’s stock portfolio does include potential AI hedges. The company’s substantial stake in Apple (NASDAQ: AAPL), which recently announced the advent of “Apple Intelligence,” could help mitigate the risks associated with widespread technological disruption.

Apple’s ecosystem of AI-powered devices, services, and user experiences may help it navigate the changing landscape in the next stage of humanity. Still, the conglomerate’s lack of significant exposure to companies at the heart of the AI revolution is arguably another underappreciated risk factor.

What’s the big picture?

While Buffett’s value investing approach has stood the test of time, it’s crucial to consider whether it adequately accounts for the game-altering potential of the AI revolution. Traditional metrics, such as price-to-earnings ratios and book value, may not fully capture the disruptive impact of AI on industries and business models.

For instance, companies that appear undervalued based on historical data may face unexpected challenges as AI reshapes the competitive landscape. Meanwhile, businesses at the forefront of AI could continue to experience ultra-rapid growth, despite their premium-laden valuations.

Berkshire Hathaway’s stock portfolio doesn’t reflect this important dynamic. Instead, the conglomerate’s equity portfolio is crafted to leverage its massive positions in dividend-paying companies, thereby creating value for shareholders through compounding.

This strategy has worked like a charm historically, thanks to the company’s size and long-term holding strategy. However, if these income streams are disrupted by unforeseen quantum leaps in innovation, Berkshire Hathaway’s core value-creation strategy may come under pressure.

Key takeaways

In ordinary times, contemplating such a drastic shift in the investing landscape would be an exercise in futility, unworthy of serious consideration. However, we are on the precipice of an unprecedented era, propelled forward by technological innovation’s relentless, exponential growth.

This exponential progression is not a hypothetical or a distant possibility. It’s a stark reality that investors will have to grapple with in the imminent future. The rapid pace of change, fueled by a coming abundance of intelligence, is poised to reshape industries, disrupt traditional business models, and redefine the core tenants of portfolio construction. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Warren Buffett meets AI: Is Berkshire Hathaway prepared for technological disruption? appeared first on The Motley Fool Australia.

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George Budwell has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, and Bitcoin. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Brickworks Limited (ASX: BKW) share price is up 0.6% in morning trading amid news related to Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (AKA Soul Patts). The Brickworks rise comes at the same time as the S&P/ASX 200 Index (ASX: XJO) being down 0.2%.  

Brickworks and Soul Patts have been closely linked for decades due to their cross-ownership partnership. Soul Patts owns 43% of Brickworks and has been a shareholder since 1969.

The purpose of that structure was, and still is, to deter corporate raiders. Brickworks benefits by owning approximately a quarter of the diversified investment house.

The two businesses are becoming even closer after an appointment to the Brickworks board.

New Brickworks director

Brickworks has appointed Soul Patts CEO Todd Barlow to its board as a non-executive director.

As such a substantial holder of Brickworks shares, Soul Patts has had two directors on the Brickworks board. Michael Millner recently retired from the Brickworks board of directors at the 2023 annual general meeting, so Barlow will become the second nominee director.

Robert Millner has been the chair of Brickworks for 25 years and the chair of Soul Patts for 26 years.

The appointment of Barlow to the board maintains the number of directors at seven after Michael Millner’s retirement. Barlow will also be a member of the remuneration and nomination committee.

Barlow has been the CEO and managing director of Soul Patts since 2015, having previously been the managing director of Pitt Capital Partners for five years.

Brickworks also announced that Malcolm Bundey, who has been a non-executive director since October 2019, has been appointed as the deputy chair of Brickworks effective today.

Management comments

The new Brickworks deputy chair, Malcolm Bundey, said:

We are pleased to welcome Todd to the board of directors of Brickworks. The company looks forward to leveraging his deep experience to assist us in achieving performance objectives across our diversified portfolio of businesses.

New Brickworks director Todd Barlow said:

I look forward to continuing the long association Soul Patt’s has with Brickworks and assisting Brickworks to execute its strategy to deliver sustainable earnings growth and long-term value to shareholders.

Barlow’s ownership of Brickworks shares

Investors are able to learn how many shares a director has through ASX disclosures.

The Brickworks ASX appendix 3X announcement showed Todd Barlow has a total of 2,000 Brickworks shares. This currently has a value of just over $53,000.

Brickworks share price snapshot

In the last 12 months, the Brickworks share price is up just over 1%, as shown on the chart below.

The post Brickworks share price jumps on big Soul Patts news appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.