The Oracle of Omaha’s short-term actions paint a potentially worrisome picture for investors.
Though important data releases aren’t hard to come by on Wall Street, there’s arguably not an event that captivates the attention of professional and everyday investors quite like Berkshire Hathaway‘s (BRK.A 0.18%) (BRK.B 0.09%) annual shareholder meeting.
In the mid-1970s, Berkshire held its annual meeting in the employee cafeteria of one of its subsidiaries (National Indemnity) and typically drew two dozen shareholders. For this years’ meeting, around 40,000 people were in the audience.
The reason Berkshire Hathaway’s annual meeting is viewed as something of a Mecca on Wall Street is because investors get the rare opportunity to pick the brain of one of the stock market’s most-successful asset managers, Warren Buffett. Since taking over as CEO six decades ago, the aptly named “Oracle of Omaha” has nearly doubled up the annualized total return, including dividends, of the benchmark S&P 500 (^GSPC -0.07%).
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
While all Berkshire Hathaway shareholder meetings are eventful in their own way, this years’ gathering on May 3 held special significance. Following the question-and-answer session, Buffett announced that he’d be stepping down at the end of the year and, with board approval, hand the reins to his predetermined successor, Greg Abel. Though many aspects of Berkshire Hathaway will remain the same under Abel, some things will undoubtedly change.
But there’s another big story that’s flown under the radar as a result of Warren Buffett’s monumental announcement — and it’s terrible news for Wall Street.
Berkshire Hathaway’s cash pile is at an all-time high
When Berkshire holds its annual shareholder meeting, the company also releases its first-quarter operating results. This gives investors a look at how Berkshire’s roughly five-dozen fully owned subsidiaries are performing (BNSF, GEICO, and so on), as well as offers some broad-stroke insight on Buffett’s trading activity via the company’s cash flow statements.
In particular, the one figure that stands grandest of all in Berkshire’s quarterly report is its cash balance (in this instance, “cash” refers to cash, cash equivalents, and U.S. Treasuries, combined). Buffett’s company closed out the March quarter with a record $347.7 billion in cash at its disposal.
A healthy cash position is something Wall Street normally rewards companies for — but not in Berkshire Hathaway’s case.
The investing community often looks to Warren Buffett and his team of top advisors (Todd Combs and Ted Weschler) as something of a barometer to the stock market’s attractiveness. If the Oracle of Omaha, who made a name for himself as an investor, isn’t an active buyer of stocks, it’s something to take note of and potentially be concerned about.
Based on Berkshire Hathaway’s quarterly cash flow statements, Buffett and his investing lieutenants have been net sellers of stocks for 10 consecutive quarters — a period ranging from Oct. 1, 2022 to March 31, 2025. During this stretch, over $174 billion more was sold in equity securities than was purchased.
When this $174 billion figure is added to the cash flow generated from Berkshire Hathaway’s owned assets, it’s not difficult to understand why the company’s cash pile has more than tripled in three years and hit an all-time high of nearly $348 billion.
The $348 billion question is: Why isn’t Warren Buffett a net buyer of stocks?
Image source: Getty Images.
Warren Buffett is an unwavering value investor (and that’s a big problem right now)
One of the most foundational aspects of the Oracle of Omaha’s investing philosophy is to never bet against America. This strong suggestion, which Buffett has made on numerous occasions, is reflective of his understanding of economic and stock market cycles.
Specifically, Berkshire’s chief realizes that these cycles aren’t linear. Both economic recessions and bear markets are historically short-lived. The typical U.S. recession since the end of World War II has lasted only 10 months, whereas the average S&P 500 bear market has endured just 286 calendar days since the start of the Great Depression in September 1929.
On the other hand, the average economic expansion has stuck around for roughly five years over the last eight decades, and the typical S&P 500 bull market has lasted 1,011 calendar days. Rather than positioning Berkshire’s investment portfolio for events that are inevitable but unpredictable, Buffett has angled his company’s owned and invested assets to benefit from the disproportionately long nature of economic expansions and bull markets.
But the other unwavering aspect of Buffett’s investing philosophy is that he doesn’t buy unless he feels he’s getting a good deal. Berkshire’s chief is a diehard value investor who’ll pass on buying into great companies if the valuation doesn’t make sense.
For example, Buffett spent almost $78 billion repurchasing shares of his own company’s stock for 24 consecutive quarters (July 1, 2018 – June 30, 2024). During this period, Berkshire Hathaway stock vacillated between a 30% and 60% premium to its book value.
Yet over the last three quarters (July 1, 2024 – March 31, 2025), Buffett has gone cold turkey with his favorite stock to buy. The reason? Berkshire’s stock has been trading at a 60% to 80% premium to book value since the midpoint of 2024. If the premium valuation of Buffett’s own company dissuades him from buying back shares with a record amount of cash on hand, imagine what a historically pricey stock market has done.
S&P 500 Shiller CAPE Ratio data by YCharts.
Although “value” is a subjective term that’s going to be different from one investor to the next, the S&P 500’s Shiller price-to-earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), leaves no doubt that the stock market entered 2025 at a historically expensive valuation.
In December, the Shiller P/E nearly hit a multiple of 39, which marks the highest level during the current bull market cycle, as well as the third-priciest multiple during a continuous bull market when back-tested to January 1871. The average Shiller P/E multiple since 1871 is a considerably more modest 17.24.
While the Shiller P/E isn’t useful for predicting when downturns will occur in the S&P 500 or Wall Street’s other major stock indexes, it does have a knack for eventually foreshadowing significant downside in the broader market. The previous five instances where the Shiller P/E topped 30, dating back to 1871, were all eventually followed by declines ranging from 20% to 89% in one or more of Wall Street’s major stock indexes.
Even though Warren Buffett hasn’t made any specific mention of the Shiller P/E, or any valuation index for that matter, his actions — i.e., 10 consecutive quarters of net-selling activity and Berkshire’s record cash pile — make crystal clear that stock valuations aren’t attractive.
Though the future remains bright for the U.S. economy and stock market, Buffett’s short-term actions paint a potentially worrisome picture for investors in the coming quarters.
