Here’s the Stock Warren Buffett Spent the Last 9 Months Secretly Accumulating a $6.9 Billion Stake In

Here’s the Stock Warren Buffett Spent the Last 9 Months Secretly Accumulating a .9 Billion Stake In

Warren Buffett hasn’t seen much upside in the stock market lately.

With stocks rising over the past 18 months, it has become increasingly difficult to find a good company trading at a fair price. The challenge is even tougher for Buffett, who manages a portfolio of $377 billion in stocks and $189 billion in cash. Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B).

The current environment is reflected in Buffett’s portfolio management decisions. he is he sold more shares than he bought during each of the last six quarters. But there was one stock that caught his eye in the third quarter of last year, and he’s accumulated shares in each of the last three quarters.

By the end of 2023, it had purchased around $5 billion worth. The only problem is that we had no way of knowing exactly which stock Buffett found so attractive, thanks to a special disclosure exemption from the SEC.

The details are finally out, with Berkshire’s latest 13-F filing revealing all of the conglomerate’s stock positions as of the end of the first quarter. Here is the mystery stock that Buffett is buying.

Here’s the Stock Warren Buffett Spent the Last 9 Months Secretly Accumulating a .9 Billion Stake In

Image source: The Motley Fool.

A stock that’s in Buffett’s wheelhouse

The stock on Buffett’s buy list in each of the last three quarters was a commercial property and casualty insurance company. Chub (NYSE:CB).

Buffett acquired nearly 26 million shares of the company over the past three quarters, a stake that is now worth about $6.9 billion. That’s enough to make it one of the top 10 stocks in Berkshire’s portfolio.

Chubb fits perfectly into Buffett’s circle of expertise. The Oracle of Omaha has been investing in insurance since the 1960s. Shortly after taking control of Berkshire Hathaway, a simple textile company, in 1965, Buffett added an insurance business to the conglomerate. Insurance is now central to Berkshire Hathaway’s operations, providing a valuable premium float for Buffett to invest.

With over 60 years of experience in the insurance industry, it’s safe to say that Buffett knows when a insurance actions is attractive. His in-depth knowledge of the sector gives him an advantage in spotting undervalued insurers. Chubb has several attractive qualities as an insurer, but its stock price may not fully reflect the quality of the company.

Many insurance companies have performed well in 2023 thanks to higher prices and interest rates. Chubb was no exception. Its net earnings per share for the full year climbed 75.9% thanks to a 13.5% rise in net premiums and written and improved technical margins. Strong results continued in the first quarter, with a 14.1% increase in net written premiums, likely due to higher prices.

Chubb’s investments are also doing well. The company holds many long-term fixed income assets, such as mortgage-backed securities and corporate bonds, in its investment portfolio. This resulted in low relative returns when the Federal Reserve raised interest rates, but it now produces strong growth in investment income each quarter. Investment income rose 25.7% in the first quarter.

Chubb’s core business looks very strong and the investment picture is looking good. It’s no surprise that Buffett is interested in the stock.

Should investors follow Buffett’s lead?

Now that Berkshire Hathaway has revealed that Chubb is the stock it has been buying for the past three quarters, Buffett may be done buying more stocks, at least for now. The stock rose from around $200 per share when Buffett first bought it in the third quarter of last year, to a new all-time high of $270 following Berkshire’s disclosure.

The title nevertheless remains quite attractive. The shares trade for a forward P/E of just 11.6x, putting them firmly in the value camp that Buffett loves. Its book value of 1.7x is higher than its historical average, but is also a fair price to pay given its improving investments and strong underwriting operations.

Chubb remains a great investment for Buffett, even at this price. This ticks a lot of boxes. Berkshire has the potential to continue increasing its investment, as it currently holds approximately 6.4% of the shares outstanding. It is a leader in its sector with excellent management. And its downside risk is lower than that of the average company, thanks to the stock’s current valuation and management’s management of its balance sheet.

Investors looking for a solid value stock to add to their portfolio in the financial sector may want to take a closer look at Chubb.

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Adam Levy has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Here are the stocks Warren Buffett spent the last 9 months secretly accumulating a $6.9 billion stake was originally published by The Motley Fool

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