Berkshire Hathaway Provides Best Safe-Haven Play in the Market Right Now
Warren Buffett turns 89 this Friday, and there’s been a lot of attention given to his recent performance.
But before getting into that…
With seed capital of around $10,000 in the mid-1950s, Buffett masterfully invested his way to a net worth of around $79 billion.
His technique is simple: He focuses on what he knows (namely financials, information technology and consumer staples) and then buys companies he believes have unique competitive advantages over the long term – and he holds them – sometimes “forever.”
Oh, and along the way, he collects massive dividends.
This year alone, Berkshire Hathaway stands to generate more than $4.6 billion in dividend income. In Buffett’s mind, collecting dividends allows him to withstand the inevitable market downturns that seem to pop up when they’re least expected.
I’m bringing this up in today’s Trade of the Day because Berkshire Hathaway (NYSE: BRK.B) shares are down 3% this year – compared with the 14% gain of the S&P 500.
So as we begin hearing the dreaded R-word more frequently (recession), it might be smart to take a look at Berkshire Hathaway as an undervalued “safe haven” play in the midst of today’s increasing market uncertainty.
Here’s the scoop…
Currently trading at around 1.3 times book value, Berkshire Hathaway seems like a bargain, which is why Pershing Square’s Bill Ackman has made Berkshire Hathaway one of his largest holdings.
Also, as of June 30, the company had $122 billion in cash – and you know Uncle Warren likes to make big acquisitions. Granted, he might be a little gun-shy after the Kraft Heinz debacle, but he still has plenty of gunpowder to reload another shot – which could be the trigger catalyst that gets Berkshire Hathaway moving upward.
With quarterly earnings growth year over year of 17.2%, Berkshire Hathaway is one play that’s as safe as you can get.
Action Plan: As Berkshire has strong “double bottom” support at $197.50, buying shares at this level looks like a safe way to do what Buffett knows best: buying low.
If the threat of a recession continues to loom large, this might be the best safe-haven play the market is offering you right now. For more insight plays like this and steps on exactly how to play them, join us in The War Room today!
About Bryan Bottarelli
Bryan graduated with a business degree from the highly rated Indiana University Kelley School of Business, and his first job out of college was trading stock options on the floor of the Chicago Board Options Exchange. He was mentored by some of the country’s top floor traders in the heart of the technology boom from 1999 to 2000, where he learned to identify and implement some of his most powerful trading secrets. Now he shares his secrets with a group of elite traders. We will be republishing some of his highly sought after content from his free e-letter, Trade of the Day.