Warren Buffett's Mystery Stock Was Just Revealed

Key Points

• Berkshire Hathaway, led by Warren Buffett, has acquired around 26 million shares of Chubb, totaling $6.7 billion.
• Chubb's stock jumped nearly 8% after the investment news, breaking out of a multi-month consolidation and reaching $269 per share.
• This move highlights Berkshire's renewed focus on insurance and aligns with Buffett's strategy of increasing financial sector investments.

Warren Buffett's latest investment move has again captured the financial world's attention. On Wednesday, regulatory filings revealed that Berkshire Hathaway NYSE: BRK.B, under Buffett's stewardship, had quietly amassed a substantial $6.7 billion position in Chubb NYSE: CB, the renowned Zurich-based property and casualty insurer. This significant acquisition, involving around 26 million shares, had been shrouded in mystery until the recent 13F filing lifted the veil.

Chubb's stock responded enthusiastically to the news, surging above its multi-month consolidation and resistance and closing the week up nearly 8%. This positive market response was a clear indication of the potential of the investment. Following the news, it opened trading at $269 per share, pushing its market capitalization well beyond $100 billion. Berkshire Hathaway's shares also saw a modest rise, with the more accessible BRK.B shares trading at $415 each.

The Investment Marks a Return to Berkshire Hathaway's Roots

This strategic investment, a return to Berkshire Hathaway's roots in the insurance sector, marks a significant move. Berkshire first ventured into this domain by acquiring the Government Employees Insurance Company (GEICO) in the late 1970s. GEICO remains a cornerstone of Berkshire's insurance operations, alongside General Reinsurance (Gen Re) and the recently acquired Allegheny.

Buffett's move to invest heavily in Chubb follows a pattern of diversifying Berkshire's portfolio. While the company has been reducing its exposure to consumer technology stocks like HP and Apple, it has bolstered its holdings in the financial sector with stakes in American Express and Bank of America. 

The revelation of Chubb as the mysterious stock with investors speculating for months underscores Buffett's enduring confidence in the insurance industry as a pillar of Berkshire Hathaway's financial strategy. 

So, as Buffett doubles down on his insurance playbook, should you buy shares of Chubb, too? Let's take a closer look.

What is Chubb Limited?

Chubb Limited has a market capitalization of $111 billion, a P/E ratio of 12.17, and a projected earnings growth of 9.48% for the year. The company also offers a 1.33% dividend yield with solid dividend growth. All of these factors, especially the P/E ratio, certainly tick many of the boxes that have made investments an attractive value proposition for Buffett in the past. 

Chubb is a global insurance and reinsurance provider operating across several segments. Its North America Commercial P&C Insurance offers a variety of commercial products, including property, casualty, and cyber risk, for businesses of all sizes. The North America Personal P&C Insurance segment caters to affluent individuals with homes, automobiles, and travel coverage. Chubb's agricultural segment provides crop and farm insurance.

Internationally, Chubb's Overseas General Insurance delivers specialty products like marine, energy, and aviation insurance. The Global Reinsurance segment offers reinsurance under the Chubb Tempest Re brand. Chubb's Life Insurance segment also covers whole life, endowment plans, health protection, and group benefits.

Sentiment is Favorable, and Momentum is to the Upside

Analysts are optimistic about Chubb's stock, which holds a moderate buy rating based on eighteen evaluations. Of these, nine analysts rate the stock as a hold, eight as a buy, and one as a strong buy. These positive ratings surpass those of its competitors, who generally receive hold ratings, including the consensus for the S&P 500.

The stock has shown strong momentum, with a 36.3% increase over the past year and a 21.36% rise year-to-date. Recently, Chubb's stock broke out of a multi-month consolidation, signaling a robust continuation of its upward trend. With technical and fundamental factors aligning favorably and Warren Buffett's investment adding to its appeal, Chubb presents itself as an attractive investment opportunity.