Carter Worth, Worth Charting founder and CEO, joins 'Power Lunch' to discuss why investors should buy Berkshire Hathaway stock.

Berkshire Hathaway shares have been lagging behind the S&P 500 following Warren Buffett's announcement of his planned departure from the company. If the company's B shares end the month lower, it would mark their longest streak of monthly declines in three years. 

Market analyst Carter Braxton Worth notes that the current sell-off is not unique to Berkshire, as insurance stocks in general are under pressure. He describes the recent decline as a normal correction within an ongoing uptrend, supported by historical patterns of similar drawdowns. Worth suggests that the stock remains in a well-defined upward channel, and sees the current weakness as a potential buying opportunity, provided investors manage their risk appropriately.

Berkshire's stock seeing normal drawdown but still in uptrend

Now, Berkshire Hathaway shares have been underperforming the S&P since Warren Buffett announced his plans to exit his role at the company. Now, if the company's B shares end July in the red, that would be their longest streak of monthly losses in three years. And Buffett himself has even tempered expectations for the stock going forward because of the sheer amount of cash that Berkshire is actually working with, having to toil around. But our next guest says his view on the stock is very simple. Just buy it. And he's here to tell us why. Joining us now is Carter Braxton Worth, founder and CEO of Worth Charting. Carter, this is a pattern thing that's developing among the charts for Berkshire Hathaway's shares that you feel good about. Why do you feel so good about Berkshire's shares right now? Well, a lot of things going on, but great to see you, Don. The first thing is, of course, this weakness, the current sell-off, the non-participation in the market rally is not unique to Berkshire. Insurance stocks in general are under pressure, Progressive, AIG, Chubb, Aflac. And so if you look at the S&P 500 insurance group, just a fraction off the April low where the market's up 30 percent. But this chart on the screen really tells a tale, and it speaks to Warren Buffett's timing. This is a ratio chart, Berkshire's relative performance of the S&P. And, of course, his all-time high in performance was on the low in 2009 because his stock was going down less than everyone else. And you see that annotated in the financial crisis spike. It took 25 years to get back to that level on a relative basis. And he literally announced his own pending retirement at the end of this year, in May of this year. And that was a new all-time high for relative performance. But let's look at something more immediate, the here and now chart of Berkshire. And so if we were simply to look at Berkshire's ascent over the past three years, you have had, count them actually, nine distinct sell-offs of 8 to 15 percent. The average is about 11.5. The current sell-off is 13. And we think it's just a normal dip, correction, drawdown, sell-off, drop, decline, whatever nomenclature one prefers. It's a countertrend and an ongoing uptrend. And the third chart might depict that very well-defined uptrend. That's the same chart just with well-defined lines, mathematically parallel lines. We're at the bottom of this well-defined channel. The channel begins from the bear market low of 2022. At that point, of course, the S&P was down 27 percent. The Nasdaq was down 37. And Berkshire stocked down as well. But this is what GARP looks like to my eye, buy into the weakness, my thinking. All right, so we're seeing the chart that we're on the screen right now, and it shows just kind of the bottom part of that channel. So as we talk about whether or not you put this trade on, you obviously have maybe a fairly tight stop on this trade in order to see it bounce. But what exactly, what's the risk management around that trade if you're going to be long? Well, I mean, the thing about stop-loss is they're very personal. Some like them wide, don't want to get stopped out. So take 10 or 12. Some are tight, you know, 3, 4 percent. I like 7. It works for me. I'll take half and then go from there. But obviously, the first message is there's nothing wrong with being wrong, only staying wrong. At some point, if it is wrong, one has to take measures. All right. Carter Wurf with the trade there on Berkshire Hathaway shares. Thank you very much. We'll see you soon, sir.

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