Should Investors Ever Bet Against Warren Buffett?


27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


News that Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B), notably headed by Warren Buffett, is going to acquire Duracell from Procter & Gamble Co has captured the financial media's limelight Thursday morning.

Here is a bird's eye view of the fundamentals and a thorough view of Berkshire's technicals.

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What The Bulls See

  • Warren Buffett and Charlie Munger, of course.
  • Cheap valuation metrics (using "A" share data): A price-to-sales of 1.85, a price-to-book of 1.50 and an enterprise value of $363.99 billion versus a market capitalization of $359 billion.
  • Net profit margins of 11 percent that spin-off levered free cash flow of $27.21 billion annually
  • Clean balance sheet metrics: a debt-to-equity ratio of 31.13 percent and a current ratio of 1.02.
  • A beta of 0.29, meaning the ride is a lot smoother in Berkshire than with the broader market.

What The Bears See

  • An aging Warren Buffett and an aging Charlie Munger.
  • A PE of around 300 -– expensive by any measure, but certainly when compared to estimated 2015 revenue growth of 7 percent and EPS growth 7.8 percent.

Technical Take

Technicians note that Berkshire's "B" shares are in the midst of a magical ride to the upside and that nothing but overbought conditions really should prevent them from continuing higher. There is a short-term uptrend channel, the upper edge of which may be a place where some selling or profit-taking could take place. That line of projected resistance comes into play at the $150-$152 range, depending on how quickly the stock runs up to test it.

On the downside, initial support for the stock (on the run up to $150) comes in at $141.28-$142.25. For those looking to buy on a pullback following the test of the upper edge of the uptrend channel, the target buy range should be down at the $140-$142 level, again depending on the timing of the test of the trend line.


27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


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