Berkshire buys Chubb: Should you?
Insurance major Chubb Limited (NYSE:CB) is in the spotlight today, thanks to Warren Buffett’s Berkshire Hathaway unveiling a substantial $6.72 billion stake in the insurance giant. Berkshire’s move has further elevated Chubb’s profile. With Chubb hitting record highs in after-hours trading following the disclosure, it’s evident that the market perceives this development as a vote of confidence from one of the most respected investors of our time.
Chubb’s allure as an investment prospect stems not only from the Berkshire endorsement but also from its robust business fundamentals. The insurer has consistently demonstrated its prowess in the property-casualty insurance sector, a domain familiar to Berkshire’s investment philosophy. With an expansive portfolio covering commercial lines specialty coverage and high-end homeowners’ protection, Chubb’s strategic positioning aligns well with Berkshire’s overarching investment strategy.
Chubb’s strong performance metrics, such as its impressive earnings per share (EPS) of $5.41 in Q1 2024, beat consensus estimates and showcased substantial growth in net premiums earned. Furthermore, Chubb’s Q1 earnings report underscored its resilience and growth potential, painting a picture of a company in strong financial health. The robust P&C underwriting income, coupled with stellar investment income and life insurance income, managed to push Chubb’s earnings beyond market expectations.
Chairman and CEO Evan G. Greenberg’s optimism about the company’s future growth prospects further bolsters investor confidence in the stock. But, beyond its recent financial performance, Chubb’s reputation as a dividend champion adds another layer of attractiveness for long-term investors. With a track record of consecutive dividend increases spanning over three decades, Chubb has consistently rewarded patient shareholders.
Additionally, the company’s commitment to share repurchases reflects management’s confidence in its own value proposition, further enhancing shareholder value. However, as with any investment opportunity, valuation remains a crucial consideration. Chubb’s current trading multiples, though reflecting the company’s premium positioning, prompt investors to carefully assess entry points.
As Berkshire’s investment in Chubb sets the stage for heightened market interest, investors are left to ponder whether they should follow suit. While Berkshire’s endorsement adds a layer of credibility, prudent investors should weigh the risks and rewards carefully before diving in.
Nevertheless, amidst the buzz surrounding Chubb’s stock, one thing is clear: the stage is set for an exciting journey ahead, filled with potential opportunities and challenges alike. As investors eagerly await the next chapter in Chubb’s story, let’s now turn our attention to the charts to uncover insights that could help navigate the waters of Chubb’s stock in the days and weeks to come.
Sustained success: Chubb’s performance legacy
It is only when we look at Chubb’s long-term weekly charts, that we can understand what a stellar performer the stock has been. If we exclude the dividend returns, the price returns the stock has provided for more than 15 years now would be enough to make a long-term investor happy.
CB chart by TradingView
The stock saw an extended bull run between March 2009, when the carnage due to the ’08 financial crisis was coming to an end, until March 2020 when the bear market during the onset of the COVID pandemic took it to levels below $100. Since then, the stock has seen a more aggressive bull run which has taken it to above $250 where it currently trades.
The interesting thing to note here is that this aggressive uptrend lasted even though the stock spent more than 2 years between 2022 and 2023 trading in a $180-$220 range. After breaking out of this range late last year, the stock quickly marched towards $260, which acted as a resistance. However, after today’s move, one can expect this resistance to be taken away easily if today’s up move lasts.
Investors, who have already bought the stock must continue to hold it as the stock currently seems to be poised to do well in the coming months. Investors, who want to purchase the stock now after Berkshire revealed its stake must ideally wait for it to cool down a bit and buy it near $240-$250. As long as the stock continues to trade above $220, bullish momentum will prevail.
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