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Looking For Superlative Returns? Investor Flags Potential 30% Gains In This Sector After Warren Buffett Turns Market Focus Toward These Stocks

Published 18/05/2024, 14:37
© Reuters.  Looking For Superlative Returns? Investor Flags Potential 30% Gains In This Sector After Warren Buffett Turns Market Focus Toward These Stocks

Benzinga - by Shanthi Rexaline, Benzinga Editor.

After Warren Buffett-run Berkshire Hathaway, Inc. (NYSE:BRK) (NYSE:BRK) revealed insurer Chubb Limited (NYSE:CB) as its mystery stock, an investment advisor said on Thursday the next rotation could be into the insurance sector.

Buffett’s Bet: Berkshire’s 13F filed late Wednesday showed that the firm accumulated 25.92 million shares of the property and casualty insurer at a valuation of $6.72 billion. This gives Berkshire a 6.4% stake in the insurer (based on 406 million in outstanding shares). The stock rallied over 8% over two sessions following the disclosure.

“Warren is back to his second love (insurance),” said Lumida Wealth founder Ram Ahluwalia in a post on X, formerly Twitter.

The investment advisor noted that Buffett was scooping up investments in multiple homebuilders in the second half of the 2023, adding that nine months later, the billionaire’s investment in D.R. Horton, Inc. (NYSE:DHI) has risen 30%, outpacing the S&P 500 Index.

“Now, Buffett has ‘alterted’ the market that the next rotation is in Insurance,” Ahluwalia said. He noted that a few insurance companies rallied in sympathy with Chubb.

Poised To Take Off? Ahluwalia pointed out that insurance premiums have remained elevated due to recent hurricanes in Florida, contributing to a 6% year-over-year increase. He added that despite strong fundamentals, stocks in the sector have lagged.

That said, the investor thinks the bad news is priced in and they are now “making more money.”

“Buffett has single-handedly re-focused Mr. Market, like the eye of Sauron, on the Insurance sector. And, perhaps if we get a ‘trend kick-off,’ we can get returns of 30% much like homebuilders on the second half of last year,” he said.

“Insurance is also consistent with what Mr. Market is building up: Value.”

Delving into Lumida’s approach, Ahluwalia said, “We have an a priori view of what the best businesses in the world are. Then we wait for the theme to perform, or the asset to go on sale for silly reasons.”

“That’s part of what lets us stay ahead of Mr. Market, or at least anticipate the turn…”

The iShares U.S. Insurance ETF (NYSE:IAK) rose 1.32% to $117.86 on Friday, according to Benzinga Pro data.

Read Next: Buffett Says No Other Americans Would Have Had To Pay Even A Dime In Federal Taxes If This Had Happened

Photo: Shutterstock

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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