Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) Vice Chairman Ajit Jain purchased approximately $20 million worth of Class A Berkshire stock this week, according to a Dec. 18 filing with the Securities and Exchange Commission.
Berkshire CEO Warren Buffett (Trades, Portfolio) named Jain, a graduate of Harvard Business School, vice chairman of the conglomerate's insurance operations earlier this year. CNBC columnist Liz Moyer added Buffett has praised Jain for raising strong capital for the conglomerate and noted he “has been seen as a possible successor” to Buffett.
Transaction details
The filing said the purchases were made at prices ranging from $295,750 to $297,000 per share, reflecting a weighted-average price of approximately $296,515. Class A shares of Berkshire traded around $290,000 at market open Friday and approximately $296,000 at the intraday high.
Moyer said Jain’s trades represent a “sign of confidence” even though the stock markets have faltered on factors like a possible government shutdown and the Federal Reserve’s decision to increase the Fed funds rate from 2.25% to 2.5% and shrinking its balance sheet, according to a CNBC article on Thursday. The Dow traded around 22,719.57 at 11:30 a.m., down approximately 140 points from Thursday’s close and approximately 510 points from Friday’s intraday high of 23,250.48.
Buffett’s favorite market indicator suggests a less significantly-overvalued market
The ratio of total market cap to gross domestic product, also known as the “Buffett Indicator,” stood at 124.6% on the Friday before Christmas. While the ratio is approximately 24% below its all-time high of 148.5%, Buffett’s market indicator is still above the “significant overvaluation” threshold of 115%. Based on the current valuation level, the U.S. stock market is projected to return approximately -0.2% per year over the next eight years.
According to the predefined and actual returns chart, the expected market return over the next eight years ranges from -8.20% in the most pessimistic case to 4.50% in the most optimistic case. The current two-year Treasury yield is 2.63%, approximately 0.14% lower than the 10-year Treasury yield of 2.77%.
Disclosure: No positions.
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