The Alpha Algorithm Chooses a Household Name

This week’s Alpha Algorithm recommendation is Berkshire Hathaway Inc. (BRK-B), the investment vehicle of famed investor Warren Buffett.  After being stuck in a trading range for the past two years, the stock broke out to a new 52-week high just last week.

Berkshire Hathaway Inc. (BRK-B), based in Omaha, Nebraska, is a holding company that owns subsidiaries engaged in the insurance and freight rail transportation business, as well as a group of utility and energy generation and distribution businesses.

Berkshire Hathaway Inc. (BRK-B) versus the S&P 500 YTD

Eight Top Investment Strategies Betting on Berkshire Hathaway Inc. (BRK-B)

1. High Quality Stock

The stock exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and low financial leverage.

2. Value Tilt

Selected using a multi-factor modeling approach, the stock is a value stock designed to enhance portfolio risk/return characteristics.

3. Fundamental Strength

A top U.S. stock based on fundamentals measured by book value, cash flow, sales and dividends.

4. Hedge Fund Alpha

Based on publicly available disclosures, successful hedge fund managers are investing in the stock.

5. Hedge Fund Gurus

The stock is one of the top U.S.-listed equity positions reported on Form 13F by select hedge funds with concentrated top holdings.

6. Morningstar’s Moat

This stock is included in a strategy that tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage or “moat.”

7. Goldman Sachs’ Active Beta

Stocks are selected according to four factors — value, quality, momentum and low volatility. They are based on criteria including book value, sales and cash flow scaled by share price, profit/assets or return on equity (ROE), risk-adjusted returns and daily standard deviation of returns.

8. Low-Interest-Rate Sensitivity

A large-cap U.S. stock selected for its low volatility and positive price performance in a rising interest rate environment.

Recommendation

Buy Berkshire Hathaway Inc. (BRK-B) at market today. Place your initial stop at $142.00.

I am holding off on recommending options at this time.

Portfolio Update

AbbVie Inc. (ABBV) fell out of favor with the Alpha Algorithm strategies remarkably fast this past week. Sell your position in this biotech spin-off for a 4.23% gain.

Also, I recently spent a lot of time reviewing both new and old Alpha Algorithm strategies.

As a result, I have removed a couple of underperforming strategies, and added several new ones.

The net effect is that I have expanded the universe of Alpha Algorithm strategies to a total of 30 in order to better reflect the growing number of strategies that are available for the Alpha Algorithm to track.

Sincerely,

Nicholas A. Vardy