Warren Buffett saw the recent market selloff coming and hoarded cash in preparation, according to analysts. Market participants are now waiting to see what his next move will be. Buffett is known for his patient investment approach and making big plays during times of economic uncertainty.
Experts think his decision to keep a lot of cash on hand puts him in a good position to take advantage of future buying opportunities. “Patience is more than a virtue; it’s a weapon,” said one analyst, pointing out Buffett’s ability to plan ahead. His strategy of waiting for the right time to invest has worked well in the past, making his moves very influential in the financial world.
As markets stay volatile, investors and analysts are watching Buffett and his company, Berkshire Hathaway, closely. They are guessing about possible acquisitions or other strategic moves that could impact market trends in the months ahead. Buffett has once again warned Wall Street to be careful.
He has an amazing track record, leading Berkshire Hathaway to nearly a 20% compounded annual gain over 59 years, twice the S&P 500’s roughly 10% increase. Buffett’s recent actions show he is wary of the current market climate. Last year, as stock prices jumped, he reduced Berkshire’s holdings in Bank of America and cash positions.
This signaled caution amid a bullish market. Investors now face a correction, with the S&P 500 dropping over 10% from recent highs. His warning is even more relevant.
Last year, as many investors were buying, Buffett became a net seller. He raised Berkshire’s cash to over $334 billion due to historically high valuations. The S&P 500 Shiller CAPE ratio, which measures price-to-earnings over 10 years, topped 37, a level reached only twice before.
This suggests stocks were overvalued, likely influencing Buffett’s choice to sell. Recent tariffs imposed by the Trump administration on imports from China, Canada, Mexico, and other countries have also raised worries. Buffett called these tariffs “an act of war” and warned they could make consumer prices go up.
This has put more pressure on the markets, pushing the S&P 500 and Nasdaq into correction territory. Investors may wonder if they should follow Buffett’s cautious approach or look for opportunities in the market downturn. History shows Buffett has consistently found value even in tough times.
For example, despite being cautious last year, he opened a position in Constellation Brands and increased his stake in Domino’s Pizza.
Buffett’s cash strategy amid selloff
Buffett’s approach focuses on the long-term prospects and valuations of individual stocks.
Even during market corrections, finding quality companies trading at low valuations can be profitable. Given Buffett’s recent warnings and market volatility, investors should consider looking for undervalued, high-quality stocks and holding them for the long haul. As always, Buffett’s strategy shows prudence and thoughtful investing.
Since 1965, shares of Buffett’s company, Berkshire Hathaway, have delivered a compounded annual return of 19.9%—almost double that of the S&P 500. Unlike many famous Wall Street money managers, Buffett has thrived during market crashes by following a simple approach: buying quality businesses at discounted prices when others are selling in a panic. Buffett often emphasizes that “the stock market is designed to transfer money from the active to the patient.” He warns against making emotional decisions during market downturns, noting that selling out of fear often leads to big losses.
Despite many sell-offs, recessions, and geopolitical crises, long-term performance proves his point—$100 invested in 1928 would be worth over $982k today. One of Buffett’s most famous quotes is, “Be fearful when others are greedy and be greedy only when others are fearful.” This is the core of his wealth-building strategy. During the 2008 financial crisis, when bank stocks were plummeting and many predicted the collapse of the financial system, Buffett invested $5 billion in Goldman Sachs.
The deal included preferred shares with a 10% dividend yield and warrants to buy common stock, ultimately netting Berkshire Hathaway over $3 billion in profit. Buffett has a simple test for market downturns: Does a drop in share price affect the intrinsic value of a business? If the answer is no, then the fundamental strength remains intact despite the market’s temporary opinion.
Berkshire Hathaway’s investment in the Washington Post shows this approach. In 1973, during a severe market decline, Buffett bought shares at just 25% of their intrinsic value. His patience paid off as Berkshire’s $10.6 million investment grew to over $200 million by 1985, a return of almost 1,900%.
Buffett discourages trying to predict market movements, calling it a fool’s game. He holds for the long term. Buffett has held shares of Coca-Cola for 36 years and has held American Express shares since the 1960s.
While most financial advisors recommend staying fully invested, Buffett views cash differently—not as something that doesn’t earn interest in a bank account, but as “financial ammunition” for when rare prospects appear. Berkshire’s huge cash position—often criticized—transforms from a liability into Buffett’s secret weapon during crashes. After deploying billions during the financial crisis, Buffett made this strategy official in his 2010 shareholder letter.
He pledged to keep at least $10 billion in cash reserves (though typically keeping closer to $20 billion). This wasn’t being overly cautious but strategic preparation for the next inevitable market panic. Buffett’s philosophy highlights the importance of staying rational, focusing on business fundamentals, and seeing market declines as opportunities rather than setbacks.
His approach provides a timeless strategy for both new and experienced investors looking to navigate the unpredictable stock market.
Image Credits: Photo by Felix Mittermeier on Unsplash
