Is Buffett Using This Methodology? It Said Buy Chubb Before the Legendary Investor
2024.06.05 07:56
- Buffett bagged a handsome gain on Chubb, but the stock corrected soon after this news was out.
- Which tools can help spot such investment opportunities before they take off?
- In this article, we will take a look at the best S&P 500 value stocks to buy.
- Invest like the big funds for under $9/month with our AI-powered ProPicks stock selection tool. Learn more here>>
Legendary investor Warren Buffett finally unveiled his latest stock pick, Chubb (NYSE:), last month. The news sent Chubb’s share price soaring 8.4% in two trading sessions, as investors scrambled to follow the Oracle of Omaha’s lead.
However, the stock has since entered a correction phase, leaving those who bought at the peak breakeven at best. But for Buffett, the investment remains a success. He started accumulating shares in Q3 2023 when the stock was around $200. Today, it sits at $264.81, a gain of over 30%.
The question remains: how can you identify undervalued stocks like Buffett before everyone else does?
Finding Value Before the Crowd
Value investing, Buffett’s signature strategy, focuses on finding stocks whose market price is lower than their intrinsic value. But how do you assess a stock’s intrinsic value?
Traditionally, this involves complex financial models that analyze a company’s financial data to determine its “true” worth. However, these models are often intricate and require a strong financial background.
This is where tools like InvestingPro fair value can help. This exclusive indicator analyzes various valuation models and provides a target price for each stock based on its financial data and cash flow.
InvestingPro Fair Value instantly tells subscribers whether a stock is undervalued or overvalued, allowing them to potentially spot hidden gems before the market catches on.
This approach can help you emulate Buffett’s value investing strategy and potentially uncover the next big winner.
InvestingPro Fair Value Identified Chubb Before Warren Buffett
InvestingPro fair value could have helped you spot the opportunity in Chubb even before Warren Buffett started buying!
Chubb shares underwent a sharp correction in the first quarter of 2023, losing more than 20% from peak to trough. However, on March 19, 2023, when the stock was close to its annual low of $186.8, Fair Value valued the stock at $268.06, giving it an upside potential of 43.5%.
This target has since been exceeded, and Chubb’s Fair Value is now $261.60, or 1.2% below Tuesday’s closing price, analysts attribute little further upside potential to the stock, with an average target of $269.50, or just 1.7% above the current price.
In other words, at the current price, Chubb is no longer an attractive opportunity for value investors like Warren Buffett, and it’s time to look elsewhere for undervalued stocks.
How to Identify the Best Value Stocks to Buy?
The InvestingPro screener is an invaluable tool for this. It enables investors to search for stocks that show potential according to Fair Value alongside a multitude of other criteria.
For example, it can be useful to combine Fair Value with the Financial Health Score, another exclusive InvestingPro indicator for assessing the risk level of stocks.
Putting theory into practice, we were able to find 11 stocks with upside potential over +30% according to Fair Value, while also displaying a Financial Health Score of “good” or better:
Source: InvestingPro
InvestingPro subscribers can easily find these stocks by reproducing the following search on the advanced screener in their member area:
Source: InvestingPro
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
