Warren Buffett is the undisputed greatest investor of all time, and his success is Berkshire Hathaway (BRK.A) (BRK.B -1.23%)the conglomerate he has run for almost 60 years, has made thousands of investors rich along with him.
It’s no surprise that investors tune in to Mr. Buffett’s every move for market insight, and the Oracle of Omaha is happy to report that his long career has delivered market-destroying profits. Providing advice has also helped.
So Berkshire’s 13F report, released last Thursday and showing the company’s stock sales, highlighted Buffett’s continued bearish view of the stock market. The company’s portfolio shrank for the third consecutive quarter as it sold stocks amid a surging bull market.
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Berkshire’s portfolio fell from $280 billion to $266 billion in the quarter, down from $352 billion at the end of 2023. Not only that, but the company didn’t buy back any shares in the first quarter for the first time in six years.
Taken together, these two signals seem to indicate that Buffett may be bracing for a possible downturn in the market, as stock valuations are particularly frothy. of S&P500 The company trades at a multiple of 30 times earnings, and its CAPE ratio, a measure of valuation based on earnings over the past 10 years, is near all-time highs. In total, Berkshire sold 7 shares and bought 3 shares during the quarter.
What sold:
- 100,000 shares apple
- 235,168,699 shares bank of america
- 719,052 shares capital one
- 20,679,787 shares New Holdings
- 1,007,062 shares charter communications
- 665,903 shares ulta beauty
- 3,977,870 shares floor and decoration
Purchased:
- 1,277,256 shares domino pizza
- 5,445 shares Heiko
- 404,057 shares Pool Co., Ltd.
Why Berkshire continues to sell its stock
Apple remains Berkshire’s largest holding, but the Buffett conglomerate has been selling shares since the fourth quarter of 2023. Meanwhile, Apple reduced its holdings from 915.6 million shares to just 300 million in the third quarter, and those sales brought in roughly $120 billion in cash.
Asked about the stock sale, Buffett said he continues to think Apple is a great company, but is avoiding rumors in Washington that capital gains and corporate tax rates could rise. He also said at Berkshire’s annual shareholder meeting that tax increases are likely due to the growing national debt. With President-elect Donald Trump set to take the White House, tax increases seem unlikely for now, but the comments about the national debt are valid.
Buffett hasn’t explicitly said the stock is overvalued, but he has complained that there are no targets for the company to buy at an attractive price. Berkshire is selling stocks, but putting the cash into Treasury bills that provide a safe haven in case the stock market falls.
What it means for investors
Although it is nearly impossible to predict short-term movements in the stock market, and while stocks are expensive according to traditional metrics, unemployment is low and inflation is currently under control, which should encourage economic growth. With the Federal Reserve cutting interest rates, the overall economy looks strong. .
There are also good reasons why stock prices have soared, including the artificial intelligence boom that has added trillions of dollars of value to the stock market. Nvidia The world’s most valuable company. Investors appear bullish on the Trump administration as they expect further tax cuts and deregulation, and lower interest rates are typically bullish for stock prices.
Still, Buffett’s signals are unmistakable. Berkshire’s top executives can’t predict a stock market crash, but they do know when stocks look overvalued. Before getting caught up in the market euphoria, it’s worth considering his perspective.
Bank of America is an advertising partner of Motley Fool Money. Jeremy Bowman has a position at Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Domino’s Pizza, Nvidia, and Ulta Beauty. The Motley Fool recommends Heico and Nu Holdings. The Motley Fool has a disclosure policy.
