Warren Buffett, the world’s most famous investor, has been sitting on a record cash hoard of $325 billion at Berkshire Hathaway, with over $288 billion in U.S. Treasury Bills. This comes as corporate valuations soar and everyone else appears to be getting in on the action. Despite being highly profitable, Buffett’s conglomerate has been actively selling stocks, including two of its top holdings – Apple and Bank of America.
Berkshire Hathaway’s sale of these stocks has yielded significant profits, with net earnings reaching $26.25 billion in the latest quarter. However, this selling spree raises questions about whether Buffett is getting out of the market due to inflated valuations or simply waiting for opportunities. The famous “Buffett indicator,” which compares the value of all listed stocks to the size of the US economy, suggests that the market may be overvalued.
The Wilshire 5000 Index indicates the market is more stretched than at the peak of the tech bubble, with a valuation ratio of roughly 200%. This could make it difficult for Berkshire Hathaway to replicate its tried-and-true model of deploying profits to beat the market. Meanwhile, high capital gains taxes, which Buffett has been preparing for, might be delayed due to Trump’s second term in office.
As the stock market reaches new heights, Buffett’s reluctance to make a big acquisition or spend his cash hoard raises questions about his market timing strategy. Is he waiting for a better opportunity to invest, or is he simply being cautious given the current market conditions? Only time will tell if Buffett’s cash hoard will be put to use or continue to accumulate.
Source: https://fortune.com/2024/11/12/warren-buffett-fearful-cash-hoard