Berkshire's stock hadn't seen a losing streak like this in a decade and a half. What's causing it?

By Emily Bary

An eight-day losing streak suggests shares had gotten overextended and an executive's recent stock sale adds a cautious data point on valuation

The rally that had pushed Berkshire Hathaway Inc.'s stock to a $1 trillion market capitalization has stalled, putting shares on track for their longest losing streak in more than 15 years.

Not only had Berkshire's stock run up sharply prior to the recent slide, but a top executive also disclosed his sale of $139 million in stock earlier this week. Executives sell stock for many reasons, but investors sometimes look at the price levels at which they sell as valuation calls of sorts.

In the case of Vice Chairman Ajit Jain, he sold 200 Class A shares (BRK.A) at an average price of $695,417.65 on Monday. The Wednesday filing disclosing this transaction showed that Jain continues to own 166 Class A shares through a combination of direct and indirect ownership, in addition to his Class B holdings.

The company didn't respond to a MarketWatch request for comment about the share sale.

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Berkshire's Class A shares finished 0.5% lower on Friday, their eighth session in a row of losses. That's the longest losing streak for the Class A shares since one of the same length that ended on June 23, 2009, according to Dow Jones Market Data.

But it's worth putting this losing streak for the Warren Buffett-led company in context. For one, shares fell 6.2% over the latest eight-day stretch. While it's been a decade and a half since the stock last dropped for eight trading days in a row, the stock has seen weaker eight-day periods more recently than that. The stock lost 6.4% during the eight-day stretch that ended on Sept. 22, 2022, though it didn't book losses in all of those sessions.

Additionally, Berkshire's Class A shares dropped by only $6.60 on one of the days in the current losing streak - a small loss in the context of the $689,280 closing stock price at the time.

The stock had staged a long winning streak just before the recent run of losses, and it may have gotten overextended judging by the recent price action. Shares rose for eight sessions in a row though Sept. 3, allowing the company to cross the trillion-dollar market-capitalization threshold for the first time along the way. Berkshire became just the eighth U.S. company to ever achieve that feat, though the company's valuation has since pulled back below the $1 trillion level.

Meanwhile, Berkshire Hathaway's Class B shares (BRK.B), which closed Friday at $447.61, are down four sessions in a row.

Berkshire has been making moves recently, including as it continues to pare its stake in Bank of America Corp. (BAC) The company generally has been building cash through stock sales, though it disclosed in August that it had taken up a second-quarter position in Ulta Beauty Inc. (ULTA)

Read: Why Warren Buffett's Berkshire likely saw shine in Ulta's beaten-down stock

Edward Jones analyst James Shanahan noted late last month that Berkshire unloaded nearly $98 billion in stock, mostly consisting of Apple Inc. shares (AAPL), during the first half of the year, while it bought roughly $4 billion of stock over that time. "Stock sales were a significant contributor to the increase in [Berkshire's] cash holdings to $277 billion at the end of June," Shanahan wrote.

The company has kept selling stock into the second half of the year. "At the annual meeting, CEO Warren Buffett attributed the prior [Apple] share sales to concerns about higher taxes," Shanahan wrote. "The potential for higher tax rates in the future could also be the reason why [Berkshire] has sold more stocks since the end of the second quarter."

See: As Warren Buffett sold Apple's stock, these funds bought in

Shanahan thinks Berkshire's operating companies will post strong earnings going forward. "In our view, however, the current share price reflects these positives," he wrote on Aug. 28, when the A shares traded at $691,350.00. They closed at $671,750.00 on Friday.

-Emily Bary

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09-15-24 1826ET

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