#WATCH | Warren Buffett says he’s investing more in Japan while staying bullish on U.S. equities. But does the data suggest more money is flowing to Japan and China? Here’s Cameron Brandt’s take!
Watch the full interview: https://t.co/0vX6bmN4LI @EPFR @AyeshaFaridi1… pic.twitter.com/L69tLz8HCz
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Warren Buffett’s Berkshire Hathaway recently released its fourth-quarter portfolio changes, revealing that the company sold its stake in an S&P 500 ETF. This move surprised many investors, as Buffett often recommends S&P 500 index funds as the best way for most people to invest in U.S. stocks. Wall Street analysts expect the S&P 500 to soar from its current level of around 6,010 in the coming months and years.
The index has a bottom-up target price of 6,920, implying a 15% upside over the next year.
Editor's Take | Warren Buffett reaffirms faith in stocks over cash, even as Berkshire's reserves hit $334B. He backs Greg Abel as his successor, calling him ready to lead.
What key market messages does Buffett’s letter hold? @nikunjdalmia explains—listen in! pic.twitter.com/Wv6s7dXc37
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Some analysts, like Tom Lee at Fundstrat Global Advisors, believe the S&P 500 could reach 15,000 by 2030, a total return of 150% from its present level. Despite these promising projections, Buffett chose to sell Berkshire Hathaway’s entire stake in the S&P 500 ETF during the fourth quarter.
Found this interesting in Uncle Warren's letter.
Buffett has been a net-seller of equities for the ninth consecutive quarter. Yet the S&P 500 has been higher 8 of the past 9 quarters.
— Ryan Detrick, CMT (@RyanDetrick) February 24, 2025
He sold the only two index funds in Berkshire’s portfolio, both of which were S&P 500 index funds purchased in the fourth quarter of 2019.
Buffett’s strategic portfolio adjustment
However, this decision does not necessarily indicate a loss of confidence in the U.S. stock market or the American economy.
Instead, it reflects Buffett’s long-stated goal of growing Berkshire’s per-share value more quickly than the S&P 500’s growth rate, which is not achievable by holding S&P 500 index funds. Moreover, Berkshire Hathaway had relatively little invested in S&P 500 index funds, with just $45 million between two ETFs in the third quarter, representing less than 0.02% of Berkshire’s $266 billion equities portfolio. Selling these funds could have been a move to consolidate minor positions into cash.
In conclusion, while Buffett’s decision to sell S&P 500 index funds may seem alarming, investors should not overreact. Buffett’s recommendation of S&P 500 index funds for general investors remains unchanged, as does the long-term potential for these funds. Valuations might be elevated in the short term, which could lead to volatility, but history suggests that patient investors in S&P 500 index funds are likely to be rewarded over time.
Image Credits: Photo by m. on Unsplash
