Warren Buffett sounded strong hopes about the U.S. economy in his annual letter to Berkshire Hathaway (BRK.A., BRK.B) shareholders. While the standard of living may have improved across income strata since Buffett's youth, not all investors will benefit equally from following his purchases.
"If you believe in Buffett's analysis, then its not too difficult to conclude that Americans will continue fueling the growth of American business," Real Money's Sham Gad wrote on Monday.
Earlier on Monday, Real Money took a look at some of the top holdings in Berkshire Hathaway's portfolio through the lens of Real Money's resident chartist, Bruce Kamich. Here are four more companies in the Berkshire Hathaway portfolio that may not be the best bet for investors in the current climate
"Warren loves Coke. He loves drinking it. He loves posing with it at his investor conferences and subtlety on TV interviews," Kamich said. "Oh, and yes he seems to love investing in the company that makes it."
Kamich also noted that of the Berkshire Hathaway holdings he reviewed, Coca-Cola's chart is fairly positive. It is trading above the rising 50-day and 200-day moving averages and its on-balance-volume line turned up in July, showing that buyers have been more aggressive on days when Coca-Cola turned higher.
Meanwhile, the chart above shows that the on-balance-volume line has been up for more than two years and moving average convergence divergence line is above zero -- both are positives. However, the rate of change of advance has slowed, Kamich said, which has generated a bearish divergence. "Bottom line -- the trend in the price of KO is up but we are cautious bulls," he said.
Kraft Heinz (KHC)
The newly-formed Kraft Heinz -- an Action Alerts PLUS holding -- doesn't have a lot of price history to work with and prices have been trading in the $70 to $80 range and could break out on the upside or downside, Kamich said.
Not surprisingly, Buffett is a fan and couldn't resis the following plug in the shareholder letter:
"The new company has annual sales of $27 billion and can supply you Heinz ketchup or mustard to go with your Oscar Mayer hot dogs that come from the Kraft side. Add a Coke, and you will be enjoying my favorite meal. (We will have the Oscar Mayer Wienermobile at the annual meeting ¿ bring your kids.)"
In the point and figure chart above of Kraft Heinz, price moves -- in either direction -- of more than a dollar are tracked and the format of the chart makes it easier to see "break outs," Kamich said. According to this chart, a trade at $80 will be considered a breakout.
Union Pacific (UNP)
"Union Pacific had a great rally from its 2009 lows but the past year has been a different story," Kamich said. He noted that with prices above the 50-day moving average but below the declining 200-day moving average, sideways trades are the best-case scenario though "fresh 52-week lows are also very possible."
In the chart above, Kamich sees two legs lower for Union Pacific on a weekly basis but does not yet see much in the way of bottoming price action.
Norfolk Southern (NSC)
While Norfolk Southern's chart isn't much different from Union Pacific's, Kamich said that it is a little weaker because prices have not been able to rally above the 50-day moving average. Additonally, the on-balance-volume line has been on the defensive and its recent improvement has been limited.
In the chart above, Kamich notes that the price of Norfolk Southern tested the underside of the neckline around $100 before retreating to new lows. Additonally, the on-balance-volume line is declining and the moving average convergence divergence oscillator is bearish.
"Warren's love of the rails may be fundamentally sound, but the charts suggest more of a backup for these two names," Kamich said.