We recently compiled a list of the 14 Best 52-Week High Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-B) stands against the other 52-week high stocks.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-B)
52 Week Range: $330.58 – $469.85
Current Share Price: $468.37
Short interest rate: 0.57%
Number of Hedge Fund Holders: 120
Berkshire Hathaway Inc. (NYSE:BRK-B) is a financial services company in the insurance, freight, rail transportation, and utility business. It offers property, casualty, life, accident, health insurance, and reinsurance and operates railroad systems in North America.
It boasts a diversified portfolio of wholly owned operating businesses that provide it with a reliable stream of income through dividends. This conglomerate encompasses a range of entities, including insurance operations, Railways, Berkshire Hathaway Energy, and many others.
Berkshire Hathaway Inc. (NYSE:BRK-B)’s core business is characterized by robust and steadily increasing earnings. In the second quarter, the conglomerate reported operating earnings of $11.6 billion, marking a 15% increase compared to the previous year.
The company retains 100% of its earnings, which it strategically allocates towards enhancing shareholder value. This is achieved through the repurchase of its own stock, the acquisition of additional operating entities, and the investment in its investment portfolio. Berkshire Hathaway has a commendable track record of reinvesting its retained earnings from its operating subsidiaries to generate greater shareholder returns.
Berkshire Hathaway Inc. (NYSE:BRK-B) is one of the best 52-week high stocks to buy, according to short sellers, and it has a solid track record in generating shareholder value. While trading at a price-to-earnings multiple of 20, the company ended the second quarter with a cash haul of $277 billion that it can use to pursue investments to generate shareholder value.
By the end of the second quarter, 120 hedge fund portfolios held Berkshire Hathaway Inc. (NYSE:BRK-B), up from 119 in the previous quarter, according to our database.
Here is what The London Company Large Cap Strategy said about Berkshire Hathaway Inc. (NYSE:BRK-B) in its first quarter 2024 investor letter:
“Berkshire Hathaway Inc. (NYSE:BRK-B) – Insurance was once again a bright spot in Berkshire Hathaway’s (BRK.B) 4Q earnings; GEICO showed meaningful margin improvement. The company once again sold some securities in the quarter, resulting in near all-time highs in the balance of cash & short- term investments. Overall, we continue to appreciate BRK.B for their financial strength, investment acumen, and disciplined management.”
Overall BRK-B ranks 4th on our list of the best 52-week high stocks to buy according to short sellers. While we acknowledge the potential of BRK-B as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.