Warren Buffett, the billionaire CEO of Berkshire Hathaway, has issued a stark warning about the current state of the stock market. In his latest annual shareholder letter, Buffett bluntly stated that “often, nothing looks compelling” when it comes to investing in publicly traded companies.
Buffett’s words are significant because he is known for his value investing philosophy, which emphasizes finding undervalued stocks with strong fundamentals. However, with the S&P 500’s Shiller price-to-earnings ratio at an all-time high of 37.73, Buffett is struggling to find attractive investment opportunities.
Historically, a reading above 30 on the Shiller P/E ratio has foreshadowed pullbacks of at least 20% in the S&P 500. Given this warning sign, it’s likely that Buffett and his team will be cautious in their investments, especially with Berkshire’s cash pile ballooning to over $334 billion.
Buffett’s willingness to exercise patience and wait for valuations to come back to Earth has proven successful in the past, leading to a cumulative gain of 6,076,172% in Berkshire’s Class A stock over the last six decades. However, when “nothing looks compelling,” investors can expect selling activity to outpace purchases on a regular basis.
The Oracle of Omaha’s latest comments suggest that the market is due for a correction, and investors should be prepared for potential volatility. As one of the most successful investors in history, Buffett’s warning should not be taken lightly.
Source: https://www.fool.com/investing/2025/02/27/warren-buffett-4-chilling-words-investors-witness