A Rotating Market Means Buying Underperforming Stocks Now

Stocks have had a strong year in 2023. But the past few weeks has seen stocks start to rotate. The big-cap tech stocks that dominated returns for most of the year are slowing down. Other sectors are starting to lead.

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  • That suggests that investors may fare well investing with companies that have been underperforming lately. They could see above-average returns, and help keep markets trending higher.

    One underperforming stock this year has been Berkshire Hathaway (BRK-B).

    The conglomerate is up 16 percent compared to a 23 percent return for the S&P 500. Plus, the company has lagged on a 10-year timeframe as well.

    But as stocks rotate to more value plays, Berkshire could stand to be a winner in the next year.

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  • The company’s insurance operations provide a massive profit center, as well as rising returns from an improving stock portfolio.

    Berkshire’s ongoing accumulation of wholly-owned businesses, as well as big companies like Occidental Petroleum (OXY) can lead to bigger returns in time.

    Action to take: Investors should consider accumulating shares here, with the stock trading at 10 times earnings. Berkshire famously doesn’t pay a dividend.

    For traders, the June 2024 $385 calls, last going for about $6.90, could see mid-double-digit gains in the first half of the year if shares trend higher.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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