Not everything goes up all the time on Wall Street, and no one expects that. Buyers of value stocks typically are prepared to wait for the longer term to play out. Nonetheless, it’s likely that fund managers notice which of their holdings are going up and which are going down. It’s likely they check on it from time to time, just to be sure.
Here’s what they’re noticing in the hallways of Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) these days: While Apple Inc. (AAPL, Financial), Coca-Cola Co. (KO, Financial) and American Express Co. (AXP, Financial) seem to be holding up well, four stocks are clearly going in the wrong direction. It might just be a short-term phenomenon, but you can bet they’re keeping a close eye on the following in Omaha.
The drug manufacturer is down from the $121 peak at the beginning of September to $107 by mid-month. Note the dramatic increase in volume – that’s the red line below the price chart. The news that sparked the sell-off: The Food and Drug Administration issued a warning on an arthritis drug made by AbbVie and other companies in the same sector. How much this affects the stock’s long-term prospects is probably a good discussion among Berkshire analysts right now.
General Motors Co. (GM, Financial)
The Detroit-based auto manufacturer, a longtime Dow 30 component, peaked in early June at $64. General Motors has spent the summer steadily declining in price until $48 provided support for a bounce to $51. Take a look at that early August volume line. General Motors is in the kind of sell-off not now reflected in the big name, big tech stocks of the Nasdaq 100.
Kraft Heinz Co. (KHC, Financial)
The packaged food company has a stock chart that looks a bit like the General Motors chart. It peaked in early summer at $44 and then sold off relentlessly until a slight bounce off of $35.50. Can Kraft Heinz break above that downtrend line or will a test of the January support at $31 be required?
Teva Pharmaceutical Industries Ltd. (TEVA, Financial)
If I were a money manager at Berkshire Hathaway, this would be the stock that would most concern me. The pharmaceutical company hit its high for the year at the beginning of February and hasn’t looked back. Teva bounced off a low of $8 in July, but doesn’t seem to have recovered substantially from that, so far.
Conclusion
Remember that Berkshire Hathaway purchased shares of Barrick Gold Corp. (GOLD, Financial) in mid-2020 and did not stick around for too long once the stock began dropping off in price. That is, the Buffett-Munger operation sold the position without too much hesitation. In this case, the value of the precious metals company didn’t seem to matter when noticable price decline emerged.
Whether this can happen to the above stocks is open to question. Just note that, at least for now, they’re headed in the wrong direction.
