The secret is out. In a Wednesday filing with the SEC detailing its Q1 investments, Warren Buffett’s Berkshire Hathaway disclosed a significant stake in Chubb (NYSE:CB), a move that had been kept confidential.
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The company purchased nearly 26 million shares of the insurance firm, valued at roughly $6.7 billion. While accumulating the stake, Buffett’s company had sought “confidential treatment” from the SEC in prior filings to keep the investment out of the public eye.
Buffett’s investment in Chubb follows a familiar pattern, as Berkshire already owns several insurance names, including Geico, National Indemnity, and General Re. The purchase also highlights the company’s recent investment strategy. Berkshire has been increasing its stakes in financial firms such as Ally Financial, American Express, and Bank of America, while reducing its holdings in consumer products.
Given Buffett’s legendary status and almost unmatched record in the investing game, the news caused a spike in CB shares. However, the move is unlikely to be viewed favorably by some on the Street, amongst them J.P. Morgan’s Jimmy Bhullar.
While based on its “superior commercial lines business, unique high-net-worth operation, and leverage to fast growing foreign markets,” the analyst considers Chubb a “top-tier franchise,” he has some misgivings, nonetheless.
“Our fundamental outlook for CB remains positive, but we are Neutral on the stock due to a lackluster view on the broader commercial lines market given concerns about pre-COVID casualty reserves and a shift in the risk of cat losses from reinsurers to primary carriers. This, along with current valuation, tempers our enthusiasm for the stock,” Bhullar opined.
Bhullar’s Neutral rating on CB includes a $266 price target, suggesting a modest 1% upside from current levels. (To watch Bhullar’s track record, click here)
Most analysts appear to be siding with the JPM view here rather than with the Oracle of Omaha. Based on a mix of 8 Holds (i.e. Neutral), 5 Buys and 1 Sell, the analyst consensus rates the stock a Moderate Buy. The $267.07 average price target is almost identical to Bhullar’s objective, suggesting the stock will remain rangebound for the time being. (See Chubb stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
