After getting caught up in the ‘September effect’ mayhem, Warren Buffett’s investment giant Berkshire Hathaway’s (NYSE: BRK.B) stock price has failed to capitalize on this week’s market recovery, sustaining notable losses.
To put the drop into perspective, Berkshire Hathaway has been on a losing streak over the past eight days. This trend emerged after the equity consistently rose during the previous eight days in a rally that propelled the company into the exclusive $1 trillion market capitalization club.
Indeed, such a losing streak has not been observed in over a decade.
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During the last trading session on September 13, Berkshire Hathaway closed with weekly losses of over 3%, trading at $447. The stock has been downward since September 4, when it reached $478.
Why is Berkshire Hathaway stock down?
Although BRK.B has been impacted by the general market sentiment surrounding fears of a possible recession and anticipation of a Federal Reserve interest rate cut, other internal factors could contribute to the sell-off.
Notably, the stock failed to mirror the general market recovery when it emerged that a senior executive offloaded a significant amount of his shares in the company.
According to a filing on September 11, Ajit Jain, the investment giant’s insurance executive, offloaded over half of his Class A shares. The sale included 200 Berkshire Class A shares for about $139.1 million, at an average price of $695,418 per share. Specifically, Jain sold 104 shares he held directly and 96 owned by family trusts.
Although the reason for the sale wasn’t provided, it could cause panic among investors regarding the company’s outlook. This concern is elevated considering Buffett highly regards Jain. At some point, the investment magnet once stated that Jain was responsible for adding billions of dollars in shareholder value.
On the other hand, analysts have noted that the sale may be due to personal reasons rather than concerns about Berkshire Hathaway’s outlook. For instance, CFRA Research analyst Cathy Seifert maintained a “buy” rating on Berkshire, suggesting the stock will be least affected by the sale.
“Those of us who have watched Berkshire Hathaway for a long time have suspected there may be a changing of the guard in insurance operations. <…> My sense is that he may be moving on, and I suspect that is behind his stock sales,” she said.
Elsewhere, while the stock has not been on an eight-day losing stretch for over a decade, it can be argued that it has lost steam after it rallied in a momentum that elevated the equity to the $1 trillion market cap.
Warren Buffett’s selling spree
In the meantime, Berkshire Hathaway has also been selling some of its key holdings. Since mid-July, Buffett has been reducing his stake in Bank of America (NYSE: BAC), with the latest sale accounting for almost six million shares. Additionally, the sale has impacted Buffett’s holding on to the technology giant Apple (NASDAQ: AAPL).
To some extent, there might be no reason for alarm based on Buffett’s historical investment prowess. Furthermore, it can be argued that the recent offloading in key companies such as Bank of America aligns with ‘Oracle of Omaha’s adjustment of his portfolio to balance taking profits and mitigating risks.
Analysts take on Berkshire Hathaway
At the same time, Wall Street analysts at TipRanks are maintaining a cautious outlook on Berkshire Hathaway. The three analysts offered a ‘moderate buy’ over the next 12 months, setting an average price target of $477, reflecting a gain of over 6% from the current valuation. On the other hand, the experts set a high target of $506 and a low projection of $448.
While Buffett’s stock is showing bearish momentum in the short term, it will likely recover if the broader market sustains its bullish momentum. At the same time, investors will likely be banking on Buffett’s investment expertise to calm any fears.
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