Warren Buffett, the CEO of Berkshire Hathaway, has been on a stock-selling spree recently. This has surprised many investors since Buffett is known for his long-term investing approach. According to Berkshire’s financial reports, Buffett stopped buying his favorite stock in the third quarter of 2024.
This is the first time in six years that he has not purchased shares of Berkshire Hathaway. Buffett and his team have also trimmed their positions in several other stocks, including Apple, Bank of America, Floor & Decor, and Paramount Global. Apple, which was Berkshire’s largest holding at the start of 2024, has been reduced by more than half.
The stock market has become expensive relative to its history. The S&P 500 delivered a total return of 25% in 2024 and 26.3% in 2023.
Buffett’s recent selling spree explained
This has pushed the price-to-earnings ratio of the index to 24.8, which is a 37% premium to its long-term average. Buffett’s decision to sell stocks and preserve cash could be a sign that he is feeling cautious about the market. Berkshire is now sitting on a record $325 billion in cash, which could be used to scoop up bargains if a correction occurs.
The fact that Berkshire has stopped repurchasing its own shares is also notable. Buffett has authorized $77.8 billion worth of buybacks since 2018, but none were made in the third quarter of 2024. This could be because Berkshire’s valuation has climbed too high for Buffett’s liking.
While Buffett’s actions do not necessarily mean that investors should rush to sell stocks, they should be prepared for a potential downturn. If history is any guide, Buffett will likely be ready to buy the dip when the opportunity arises.
