Equity Market 1st Quarter 2019 In Review – Part 2

Zero-sum is a situation in game theory in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants.
Zero-sum games are found in game theory, but are less common than non-zero sum games. Poker and gambling are popular examples of zero-sum games since the sum of the amounts won by some players equals the combined losses of the others. Games like chess and tennis, where there is one winner and one loser, are also zero-sum games. In the financial markets, options and futures are examples of zero-sum games, excluding transaction costs. For every person who gains on a contract, there is a counter-party who loses.

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Yesterday, I talked about the winners of the first quarter of 2019,

US Equity Market 2019 1st Quarter Review

But now I want to talk about the losers of the first quarter 2019.

Last month, Kraft Heinz Co shares fell to their record low after the food giant announced a multi-billion dollar write-down due to eroding value of its Kraft and Oscar Mayer products during their earnings announcement on Thursday.

I’m not a big fan of the consumer staples. Due to higher inflation, higher interest rates, consumer staples get hit because they use and convert raw materials into a finished good that you and I use as consumer. As a result, their input costs go up, directly affecting their top line sales. The chart has been ugly since mid-2017.

The other loser was Warren Buffett. Warren Buffett’s Berkshire Hathaway lost more than $4 billion in single day on Kraft Heinz plunge. Berkshire Hathaway aka Warren Buffett owns 325 million shares of Kraft-Heinz.

The other big loser was Biogen. I talked about them a couple of weeks ago.

Biogen Inc. discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases worldwide. Yesterday, shares of Biogen sank 30% and destroying $18 billion of market value, after the company and Japanese partner Eisai announced they were discontinuing late-stage clinical trials of aducanumab, a drug candidate for treating Alzheimer’s disease.