Investors were in a buoyant mood on Friday morning, as good news on the trade front suggested that a deal between the U.S. and China might be on the horizon. Upbeat comments from the White House economic advisor gave market participants a bit more optimism, although the extent to which President Trump shares that enthusiasm isn't clear. As of 11 a.m. EST, the Dow Jones Industrial Average (^DJI 0.06%) was up 123 points to 27,905. The S&P 500 (^GSPC -0.22%) rose 14 points to 3,111, and the Nasdaq Composite (^IXIC -0.52%) moved higher by 46 points to 8,526.
Every quarter, Berkshire Hathaway (BRK.A 0.64%) (BRK.B 0.54%) releases details on its investment portfolio, and some investors were surprised to see one particular company enter the ranks of Warren Buffett's holdings. Meanwhile, on the earnings front, Aurora Cannabis (ACB 12.87%) continued the string of marijuana stock reports this week, and its numbers confirmed some of the dour things that Aurora's peers have said recently.
Berkshire splurges on a luxury retailer
Shares of Berkshire Hathaway remained close to unchanged early Friday as investors got a chance to look at the Buffett-led company's latest filing with the U.S. Securities and Exchange Commission. The biggest stocks in Berkshire's portfolio remained the same, but Buffett added one particularly surprising pick from the luxury retail space: RH (RH 0.64%).
Warren Buffett. Image source: The Motley Fool.
According to the filing, Berkshire owned more than 1.2 million shares of RH as of Sept. 30, which at the time was worth about $206 million. That's just a drop in the bucket given the size of Berkshire's portfolio, and with more than $128 billion in cash available on the insurance giant's balance sheet, it's clear that Berkshire didn't make a huge commitment in RH.
Nevertheless, the move drew plenty of attention from Buffett watchers. Investors have sharply divided opinions about RH, with some having a lot of confidence after having seen the high-end home furnishings retailer recover from an extremely tough position several years ago. Others believe that RH's explosive share-price gains will be short-lived, and short-selling interest on the stock has been high for a long time.
A strong economy has been a powerful tailwind for RH's luxury segment, and a pivot to a membership model has been surprisingly successful. RH shares rose 5% on the vote of confidence from Berkshire, but the insurer's stake in the retailer isn't likely to make much of a difference in its overall performance.
A cloudy outlook hurts Aurora
Shares of Aurora Cannabis were down 5% after the Canadian marijuana grower reported its fiscal first-quarter financial results. Coming after disappointing results from some of Aurora's peers, cannabis investors had hoped that the company might buck the downward trend, but Aurora's numbers showed many of the same pressures on the business.
Aurora saw revenue from cannabis fall nearly 25% compared to last quarter, despite the fact that production volume jumped 43% to almost 41,500 kilos. The company saw weakness in both its Canadian adult-use recreational marijuana market and in wholesale bulk cannabis sales. A small gain in medical marijuana was a bright spot but couldn't offset difficulties elsewhere.
Aurora did get some good news on the liquidity front. The company said it would give investors in its convertible debentures an offer that could potentially save it from having to pay out hundreds of millions of Canadian dollars in cash. However, the move comes at the cost of issuing a considerable amount of stock, and the resulting dilution wasn't entirely positive for existing shareholders.
The cannabis industry has suffered lately, and Aurora's numbers only added to uncertainty among pot stocks more broadly. Until investors see signs of stability in Canada and growth in other markets, it could be tough for Aurora and its marijuana stock counterparts to claw back from their losses.
