Warren Buffett’s Berkshire Hathaway sold a record $97.1 billion in stocks during the first half of 2024. The company only bought $4.3 billion in stocks during the same period. This resulted in net stock sales of $93 billion, a new record for Berkshire.
The massive sell-off suggests Buffett and his team are not finding many attractive buying opportunities in the current market. It could also be a sign that the market is overvalued. Berkshire also reported having $277 billion in cash and U.S. Treasuries on its balance sheet at the end of the June quarter.
This is another record for the company. Additionally, Buffett only repurchased $345 million in Berkshire stock during the June quarter, the smallest buyback in six years.
However, history shows that the S&P 500 delivered strong returns in the 12 months following the years when Berkshire was a net seller of stocks.
Berkshire’s record stock sale insights
Since 2010, there have been seven years where Berkshire Hathaway sold more stocks than it bought.
The S&P 500’s median return during the 12 months after these net selling years was 19%. In comparison, the index has returned a median of 13% in the 12 months following years when Berkshire was a net buyer of stocks. If Berkshire remains a net seller of stocks through the end of 2024, the historical data suggests that the S&P 500 could rise by 19% in 2025.
Buffett has said that Berkshire’s huge size limits the number of stocks, which can significantly impact its bottom line. His latest shareholder letter stated that only a handful of companies can move the needle for Berkshire. This could mean that the $93 billion warning is more about Berkshire’s size than the overall market.
While market valuations are high, with the S&P 500 trading at 21.4 times forward earnings, Buffett’s warning should not be seen as a sign to avoid the market entirely. Instead, it serves as a reminder for investors to consider valuations when buying stocks in the current market environment. They should look for companies with solid fundamentals and reasonable valuations, just as Buffett and his team do.
