Warren Buffett's New Favorite Stock Is Out For All To See

On May 15, 2024, the investment world learned about Berkshire Hathaway's newest acquisition, the property and casualty insurer Chubb (NYSE: CB). Per Berkshire's quarterly filing with the Securities and Exchange Commission, Warren Buffett's holding company now owns a 6.4% stake in Chubb, or 26 million shares valued at an estimated $6.7 billion.

The Zurich-based Chubb joins Berkshire Hathaway's roster of insurance and reinsurance companies, which includes Geico, Berkshire Hathaway Primary Group, Berkshire Hathaway Reinsurance Group, and Alleghany Corporation. Chubb, which operates in 54 countries and territories, brings the number of Berkshire insurance companies to 15. Meanwhile, within the Berkshire portfolio (NYSE: BRK.B), Chubb enters at number 10, accounting for 1.8% of the portfolio's total. It's also one of 13 companies (out of 48) with a portfolio share of 1% or greater.

Following the announcement on May 15, Chubb's stock price rose 8% in after-hours trading. When the bell closed on the day, Chubb's stock was trading at $252.97. Two days later, on May 17, its stock hit a high of $274.28. To close the week of trading for May 20 to 24, shares of Chubb were priced at $264.76. (Check out 10 of the best tips for investing in stocks as a beginner.)

Chubb accounts for 1.8% of Berkshire's portfolio

According to CNBC's Buffett Watch, Chubb Limited is now the 10th-biggest holding for Berkshire Hathaway. At 1.8%, it now sits between Mitsubishi Corporation (TYO: 8058), at 2.0%, and Mitsui & Co. (TYO: 8031), at 1.7%. Per the conglomerate's 13F filing with the SEC, it completed its equity purchase of Chubb in late-March 2024.

While the new holding had been an investment mystery for the prior nine months, Warren Buffett wasn't asked about the then-unknown company at Berkshire's annual shareholders meeting on May 4, per MarketWatch. Buffett did, however, share at the meeting that Berkshire had made other moves, including cutting its holdings of Apple (NASDAQ: AAPL) — which turned out to be by 13% — and selling off its entire stake in Paramount Global. (See which stocks performed the worst in 2023.)

At 40%, Apple remains Berkshire Hathaway's largest holding by far. Bank of America, at 10.9%, is second, and American Express, at 9.6%, is third. Chubb, with its 1.8% of Berkshire's portfolio, is, as said, 10th, but analysts note that this could change should Berkshire decide to buy Chubb outright.

Chubb's future with Berkshire Hathaway

As mentioned, the announcement of the newest holding in Berkshire's portfolio resulted in a price surge for Chubb in the immediate hours and days. This, of course, is typical of any stock identified as a favorite of Warren Buffett, as coattail investors move to mimic Buffett's moves. As noted by The Associated Press, of Berkshire Hathaway's three investment managers (Buffett, Ted Weschler, and Todd Combs), Buffett is the one known to handle deals like Chubb's, where the value is at $1B or more. This said, for investors, the future of Chubb will be of particular interest: What if Berkshire buys Chubb Limited?

In a note to investors on Berkshire's equity stake in Chubb, CFRA Research analyst Cathy Seifert wrote (via the AP), "We can't speculate whether Berkshire would pursue an outright acquisition of CB, but we note their business mixes are highly complementary." If Berkshire Hathaway was to buy Chubb, it would follow in the steps of the holding company's $11.6-billion purchase of Alleghany Corporation in 2022. As explained in Berkshire's press release at the time, as a result of the deal, Alleghany's stockholders were entitled to $848.02 per share in cash. (Revisit the best-performing stocks of 2023).