BRK stock is hovering around $370. It has done very well this year, up 32% and PBV ~ 1.5
It is a good time to do set covered calls if you own BRK shares. I don’t expect the price climb up too much in next 12 months after this run. The underlying business value has not gone up that much. It might have caught up from underperformance of last few years.
Today’s price: ~$370 + 20% = $444. Place covered call for Sept 2024 calls for $444.
I routinely write covered calls and have done that on Berkshire. But step back and take a look at the chart. The stock is on a clear uptrend and more importantly it took out earlier ATH. This is the time to stay in this name. Be patient to see how far this can run. Don’t let doubt creep in, doubt that you don’t deserve gains, or the stock rally is unjustified, etc.
I was lucky that my last 2 covered calls expired. I am sitting right.
We are saying exactly opposite. My view is that BRK is unlikely to go up another 20% in next 12 months from here, so do covered calls. Let’s see what happens in Sept of 2024.
May be, may be not. I am not saying it is going to go another 20%. All I am saying is the stock is in uptrend, there is momentum behind the stock , given the current technical setup, I am not inclined to write covered call and will wait.
A overvalued stock can get very overvalued and undervalued stock can get very undervalued. I have learned that many times… now as I get older, I am getting more patient.
Here is the chart of Dollar General. The stock is down over 55% this year. One could have assumed, in may, after it is down 20%, it cannot go any further down. After earnings the stock took another beating and went down to $150, hey that is 25% down after 20% down. Again, another earnings, and the stock is down another 23% down.
The stock went down 20%, and then again went down 25% and again went down 20%. I am sure there is a fundamental reason. I am sure folks all thought the price now discounts all the bad news… Yet here we are.
Berkshire is not Dollar General. The reason I am posting this is because I am paraphrasing Newtons’ first law…
“A body in motion remains in motion in a straight line unless acted upon by an external force”
What that external force, I dont’ know. I will see it when the stock price behavior changes.
Kingran, what would be the indicator or indicators you’d look at to determine that the behavior has changed and it’s time to exit? Thank you!
(or to start writing covered calls)
I don’t look at the charts and predict. I feel confident based on valuation what will happen in next 12 months. Hence the argument for placing covered calls for Sept 2024.
LOL. A big conglomerate with 100’s of billion on equity/ bond investments… Good luck.
You have a friend in Edward Jones, they downgraded Berky. The last 2 rating changes are okay!
I don’t care about analyst ratings. They are often late and wrong.
