Warren Buffett’s Berkshire reveals its mystery stock: Chubb

Berkshire Hathaway Chairman Warren Buffett attends the Berkshire Hathaway Inc annual shareholders' meeting in Omaha, Nebraska, U.S., May 3, 2024. (File Photo: Reuters)
Berkshire Hathaway Chairman Warren Buffett attends the Berkshire Hathaway Inc annual shareholders' meeting in Omaha, Nebraska, U.S., May 3, 2024. (File Photo: Reuters)

Summary

The Omaha, Neb., company began building a secret stock position in the second half of 2023.

Warren Buffett’s Berkshire Hathaway unveiled a big investment in Chubb, resolving a mystery that has intrigued followers of the Omaha, Neb., company.

Berkshire’s stake in the insurer was worth $6.7 billion at the end of March, according to a regulatory filing made public after the market closed Wednesday. Berkshire amended earlier filings to show it had been building the position in the second half of 2023.

Chubb, one of the world’s largest publicly traded property-casualty insurers, is led by Evan Greenberg, the son of former American International Group CEO Maurice “Hank" Greenberg. Chubb was most recently in the news as the insurer of the collapsed Francis Scott Key Bridge in Baltimore.

Its shares have risen 12% this year, slightly outpacing the S&P 500’s 11% advance. The stock looks cheap: It traded earlier this week at 11.3 times its projected earnings over the next 12 months, compared with 20.6 times for the S&P 500 and 15.3 times for its financial sector, according to FactSet.

Berkshire’s filing also showed that it sold off its position in HP in the first quarter. The company disclosed earlier this month that it slashed its flagship position in Apple in the first months of 2024.

Institutional investors who manage at least $100 million in U.S. stocks and certain other equities must disclose their holdings as of the end of each quarter in Form 13F filings with the Securities and Exchange Commission.

But Berkshire’s public filings for the third and fourth quarters of 2023 noted the company had omitted at least one holding for which it was requesting confidential treatment from the SEC. One reason investors can ask to keep a position private is that disclosing it would reveal an ongoing program of buying or selling.

Some observers guessed that Berkshire was buying shares of a financial company because of a clue in its quarterly filings. Berkshire reported that its cost basis had increased for stock investments in the category of banks, insurance and finance.

Investors have 45 days to submit the filings, so they provide a dated snapshot of stock portfolios. Still, many investors pore over Berkshire’s filing to see what Buffett and his investing deputies have been buying and selling.

Wednesday’s filing comes less than two weeks after Berkshire’s annual meeting in Omaha, where Buffett praised Apple despite the news that Berkshire had sold about 13% of its stake. Buffett said the iPhone maker was “an even better business" than American Express and Coca-Cola, two major holdings in Berkshire’s stock portfolio. He hinted that tax considerations may have played a role in the decision to sell some shares.

Shareholders had watched with interest as Berkshire’s Apple position grew to nearly half its stock portfolio at year-end. Even after the sale, Berkshire held shares worth $135.4 billion at the end of March.

Chris Bloomstran, president and chief investment officer of Semper Augustus Investments Group, which has owned Berkshire shares since 2000, said it was a clear call for the company to sell some of its Apple shares.

“It’s too big of a business to grow revenues as rapidly as it had over the past decades," Bloomstran said. “The stock is way ahead of the fundamentals of the business."

Apple traded early this week at about 27 times its projected earnings over the next 12 months, above a 10-year average of a little more than 19 times, according to FactSet. Apple shares are down 1.5% this year. Antitrust challenges and a slump in iPhone sales in China have weighed on the stock.

The quarterly filing that showed the reduction in Berkshire’s Apple stake also indicated the company had sold about 2.5% of its shares of Chevron, another big holding.

Buffett said at the annual meeting that Berkshire had exited its position in Paramount Global, where drama has been unfolding over potential mergers. Wednesday’s filing showed the sale was still under way at the end of March.

“We’ve sold it all, and we lost quite a bit of money," Buffett said, adding that he was responsible for the investment.

James Shanahan, a senior equity research analyst at Edward Jones, estimated ahead of the filing that Berkshire lost $1.8 billion on the investment, given Paramount’s average daily share price when Berkshire was buying and selling.

Berkshire shares have been on a run this year, hitting multiple records and outpacing the broad stock market. The company’s Class B shares have gained 16%.

Write to Karen Langley at karen.langley@wsj.com

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