Warren Buffett’s Selling Streak: Insights into Berkshire Hathaway’s Strategy
Few money managers attract attention from both professional and everyday investors like Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) CEO, Warren Buffett. Since he took over as CEO 60 years ago, Buffett has delivered a staggering cumulative return exceeding 6,340,000% on his company’s Class A shares (BRK.A). In comparison, the benchmark S&P 500 (SNPINDEX: ^GSPC) has risen about 37,300%, including dividends, during the same period. This impressive performance naturally draws significant attention from investors.
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Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Throughout his tenure, Buffett has remained a consistent optimist, believing that the U.S. economy and stock market largely trend upward. This approach benefits patient investors positioned to capitalize on prolonged economic growth and bull markets. However, despite holding a record amount of cash—which includes cash, cash equivalents, and U.S. Treasuries—Buffett has likely not been investing heavily for a crucial reason.
Warren Buffett’s Stock Selling: A Nine-Quarter Trend
As of the end of 2024, Berkshire Hathaway reported an unprecedented $334.2 billion in cash, cash equivalents, and Treasuries. This substantial cash reserve offers considerable financial flexibility but does not align with investor expectations for an investment-focused firm.
Recent regulatory filings indicate that Buffett has increased Berkshire’s positions in Japan’s major trading companies: Mitsubishi, Itochu, Mitsui, Sumitomo, and Marubeni. An agreement now permits Berkshire to gradually increase its stakes in these holdings beyond 10%. Additionally, filings from January and February show select purchases in satellite-radio operator Sirius XM Holdings, oil and gas company Occidental Petroleum, and domain-name registry service VeriSign.
While these recent acquisitions might seem promising—especially with the S&P 500 and Nasdaq Composite entering correction territory—investors should consider the broader context. Buffett has consistently sold more stocks than he has purchased for nine consecutive quarters, totaling an immense $173 billion in net selling activity. This trend is the key factor behind Berkshire’s elevated cash reserves.
Buffett’s reluctance to buy, including his own company’s shares, during the second half of 2024 further underscores his cautious stance. Since changing buyback regulations in July 2018, Buffett has approved nearly $78 billion in share repurchases, with consistent buybacks for 24 straight quarters through June 2024.
Understanding Buffett’s Valuation Strategy
Buffett’s ongoing net-selling strategy and hesitation to invest can largely be attributed to valuation considerations.
Image source: Getty Images.
Buffett is often best described as a “value investor,” dedicated to acquiring excellent companies at fair prices. In Berkshire Hathaway’s 2008 letter to shareholders, he famously stated, “Price is what you pay; value is what you get,” a principle influenced by his mentor, Ben Graham. This philosophy emphasizes that a company’s stock price may not reflect its underlying performance or long-term worth. Buffett remains focused on value and is willing to wait for prices to align with his valuation criteria.
Currently, the reason for Buffett’s restraint in making purchases, including shares of his own company, is clear: the market lacks apparent value.
JUST IN 🚨: Warren Buffett Indicator hits a new all-time high of more than 203%, surpassing the Dot Com Bubble, the Global Financial Crisis, and the 2022 Bear Market 🐻 pic.twitter.com/44Kio9jFQd
— Barchart (@Barchart) November 29, 2024
Buffett has often referred to the market-cap-to-GDP ratio as a reliable gauge of market valuations. Coined the “Buffett Indicator,” this approach compares the total market capitalization of publicly traded firms to the U.S. GDP. Historically, this indicator has averaged around 85% since 1970. However, just before the S&P 500 reached its all-time high, the indicator exceeded 207.33%, marking an unprecedented deviation from its historical average.
Berkshire Hathaway’s Stock Valuation Raises Questions for Buybacks
On March 18, Berkshire Hathaway’s Class A shares were trading at a striking 74% premium to book value. Warren Buffett, known as the Oracle of Omaha, has a history of conducting share buybacks when his company’s stock is valued at a 20% to 50% premium to book value. However, he has opted not to buy back shares now that Berkshire’s stock is priced at a 50% to 80% premium.
Buffett’s Relentless Commitment to Value Investing
At the heart of Warren Buffett’s investment philosophy is a steadfast commitment to value. The vast cash reserves, cash equivalents, and U.S. Treasuries on Berkshire Hathaway’s balance sheet do not sway his core strategy. Until stock valuations, including his own company, experience a significant retracement and present appealing price dislocations, Buffett is expected to continue being selective with his investments, likely leaning toward selling stocks rather than purchasing them.
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*Stock Advisor returns as of March 18, 2025
Sean Williams holds positions in Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool recommends Occidental Petroleum. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
