"Insider Buying" often serves as a buy signal for a given stock. Always remember that insiders are privy to certain information that outsiders may not have access to. So, when you see a particular increase in insider transactions for a company, it is often best to check who is buying and the purpose of such transactions.
A recent "insider buy" triggered my interest this week This time; it is that of the vice chairman of Berkshire Hathaway Inc (NYSE: BRK.A),who just bought shares worth about $68 million. Before the purchase, Abel owned relatively few company shares despite his position. Then, his shares were about $2.7 million of Class B shares and five Class A shares, according to the proxy statement filed in March 2022.
Recently, he bought 168 Berkshire Hathaway Class A shares through the Gregory Abel Revocable Trust on behalf of a family trust for his children, wife, and certain family members Proceeds from the sales of his 1% stake (about $870 million) in Berkshire's Hathaway Energy was used to purchase these shares.
The big question is: Why is he increasing his stake in Berkshire?
Why Greg Abel bought more Berkshire Shares
"Insider ownership" is an essential criterion investors look out for before purchasing shares of a particular company. Before I buy any stock, I ensure that the insider ownership is more than 20 percent of the company.
There have been concerns from Berkshire shareholders on why someone who is poised to become a successor of Warren Buffet has little stake in the company. For many, it shows a lack of seriousness in overseeing the affairs at Berkshire.
This purchase increased his skin in the game and aligned his interest more closely with shareholders who are looking out to him as a worthy successor of Buffet.
Still a Rough Year For Berkshire
The timing of the stock purchase happened by chance since the company's shares have declined by 10% in 2022 (YTD) but still leading the S&P 500, which dropped by 22%. Shares of the company have dropped by 24% from their peak in March.
However, I expect Berkshire to be bullish during the coming weeks. An uptrend is expected because of this insider transaction, but it will be brief as a result of the general outlook of the market.
Up is Still The Way For Berkshire
A look at Berkshire's portfolio shows that up is still the way for Berkshire to go, no matter the current trend. Companies covered in this portfolio are fundamentally stable to overcome different market conditions.
More than 90 different companies, including BNSF railroad, Geico insurance, several major utilities, manufacturing, and retail companies, including See's Candy, Helzberg Diamonds Queen Diaries, and Precision Castparts, belong to Berkshire Hathaway.
Besides the companies it owns, several companies are in its investment portfolio. It has significant stakes in companies such as Apple, Kraft Heinz, Kroger Co, Johnson & Johnson, Snowflake, DaVita Inc, Moodys Corp, Marsh McLennan, Lubrizol Shaw industries, Benjamin More & Co, Bank of America, America Express, and Coca-Cola.
If you consider Berkshire stock too expensive for you as a retail investor, why not look at Berkshire Hathaway (B shares) (NYSE: BRK.B)? It's currently trading for $269.
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