Chart of the Day – $BRK/B, Best Performer Among Mega Caps in 2013

by Enis August 16, 2013 10:12 am • Commentary

With CSCO’s move lower yesterday, BRK/B is now the best performing stock among the top 25 stocks in the S&P 500 index, up around 28% in 2013.  That’s quite a move for a company that was already worth more than $200 billion in market cap terms to start this year.

However, BRK/B closed below its 50 day moving average for the first time in 2013, yet another example of a strong stock in this market showing some signs of technical weakness:

Daily chart of BRK/B, 50 day ma in pink, 100 day in green, 200 day in black, Courtesy of Bloomberg
Daily chart of BRK/B, 50 day ma in pink, 100 day in green, 200 day in black, Courtesy of Bloomberg

The first line of support is around 110, which served as support in both May and June.  On the upside, the 50 day moving average is around 115.50, and the all-time high is 119.30.

The longer-term chart shows the importance of the 100 level, which was the previous high back in 2007:

Monthly chart of BRK/B, Courtesy of Bloomberg
Monthly chart of BRK/B, Courtesy of Bloomberg

The 100-101 area should be stout support in the coming months if any substantial correction materializes.

Looking at the trailing 12 month P/E, Berkshire is around the midpoint of its 10 year valuation multiple, around a 20 P/E:

12 month trailing P/E for BRK/B, Courtesy of Bloomberg
12 month trailing P/E for BRK/B, Courtesy of Bloomberg

The real key for investors in BRK/B is the future trend of earnings.  In 2008, 20 P/E turned out to be an expensive buy since earnings were stagnant over the next few years, while 20 P/E was a nice buy in 2011 as earnings accelerated in the past 2 years.

From a technical standpoint, the buyers seem tired, as the stock has hardly moved since the end of May, and the 50 day moving average has flattened out.  It’s worth keeping an eye on this market leader for a gauge of broader investor enthusiasm.

 

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