Warren Buffett buys shares of this company. Should you do the same?

of Warren Buffett Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) owns one of the most watched investment portfolios in the world. This is why it was alarming when he sold his shares to several believers including Apple, Bank of America, Paramountand HP — in the first half of 2024.

Buffett has told investors to “be fearful when others are greedy and be greedy only when others are afraid,” and his recent moves suggest investors are getting too greedy after S&P 500 the index has repeatedly set new highs over the past year.

But amid those sales, Berkshire increased its stake in the American-Swiss insurance giant Chubb Limited (NYSE: CB). It initially purchased 8.1 million shares of Chubb in the third quarter of 2023, increased its position by 12 million shares in the fourth quarter and bought another 5.8 million shares in the first quarter of 2024.

That represents a 6.4 percent stake in Chubb, and those shares now represent 2.3 percent of Berkshire’s entire portfolio. Should investors follow Buffett’s lead and invest in this leading insurer?

How fast is Chubb Limited growing?

Chubb is the largest publicly traded provider of property, supplemental health and casualty insurance. Headquartered in Zurich, Switzerland, it does business in 54 countries and territories and employs approximately 40,000 people worldwide.

The current company was created after ACE Limited acquired the original Chubb Corporation and inherited its brand in 2016. It later acquired other companies such as Healthy Paws and Catalyst Aviation to expand its portfolio. From 2016 to 2023, it grew its revenue at a compound annual growth rate (CAGR) of 7% as its earnings per share (EPS) grew at a CAGR of 14%.

Chubb offers a diverse range of insurance products, so it’s generally simpler to gauge its long-term growth through its consolidated net premiums and core operating income. It experienced a slowdown especially during the outbreak of the COVID-19 pandemic in 2020, but its activity quickly recovered over the next three years.

Data source: Chubb Limited.

In the first half of 2024, Chubb’s consolidated net premiums rose 12.9% year over year as core operating income rose 15.7%. It attributed this expansion to its strong growth in property and casualty (P&C), life insurance and investment income underwriting.

The story continues

Analysts expect Chubb’s revenue and basic operating income per share to both rise about 9% for the full year. Based on those expectations, Chubb still looks very cheap at 12 times forward earnings. It also pays a forward dividend yield of 1.35%.

Should You Follow Warren Buffett’s Lead?

It’s easy to see why Warren Buffett likes Chubb. It’s well-diversified, has a broad moat, and its low multiple should also limit its downside potential. Top insurance companies are usually evergreen stocks that are resilient to economic downturns.

Moreover, Berkshire Hathaway already directly owns insurance companies such as GEICO, Gen Re and Alleghany. Own insurance and investment businesses generated 40% of total operating income last year. So it makes perfect sense for Berkshire to invest in a resilient sector it knows well, as more macro-sensitive sectors face unpredictable headwinds.

Chubb isn’t an exciting investment, but its stock has steadily risen more than 70% over the past five years as it has bought back more than 10% of its shares. So if you’re worried about high interest rates, geopolitical strife, or other headwinds crushing your high-growth stocks this year, it might be a smart idea to buy some Chubb stock.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Leo Sun has positions in Apple. The Motley Fool has positions and recommends Apple, Bank of America, Berkshire Hathaway and HP. The Motley Fool has a disclosure policy.

Warren Buffett buys shares of this company. Should you do the same? was originally published by The Motley Fool