Image source: The Motley Fool
My hero is Warren Buffett, the 94-year-old chair of American conglomerate Berkshire Hathaway. In an investing career beginning in the 1940s, the Oracle of Omaha has generated massive wealth for investors. He’s also donated $60bn to good causes and will do the same with 99% of his current fortune of $149.5bn.
Buffett’s amazing success has created hundreds of millionaires and billionaires in his home town of Omaha, Nebraska. Disclosure: my family portfolio owns Berkshire Hathaway stock. But ‘Uncle Warren’ sold stocks heavily in late 2024, building the largest cash pile in corporate history, which has got me thinking.
A crash course?
As well as owning operating companies and insurers, Berkshire manages a portfolio of stocks and US Treasurys (government bonds). And Buffett has been selling stocks and reinvesting proceeds into Treasurys.
Obviously, I can’t hope to know the mind of such a genius. Still, one of Buffett’s popular sayings comes to mind: “Be fearful when others are greedy and be greedy when others are fearful.”
The investment guru wrote this back in mid-October 2008. Back then, in the depths of the global financial crisis of 2007-09, Buffett revealed that his non-Berkshire wealth was almost 100% invested in US stocks. Since then, returns from American equities have been astonishing.
Clearly, Warren loves buying with blood in the streets. Now that he is selling stocks, is it because he expects a crash? Who knows, but if he is preparing for a collapse, then he’s going the right way about it.
Buffett sells stocks
Notably, Berkshire has halved its holding in US mega-cap Apple — another stock in my family portfolio. Likewise, he has slashed the group’s stakes in big American lenders Bank of America and Citigroup. But maybe Buffett is just top-slicing, taking profits after the US banking index leapt by 40% last year?
Following these and other sales, Berkshire had a record cash pile of $334.2bn at end-2024. That’s almost doubled in a year and this sum is larger than all but a handful of listed European companies. It still leaves the firm with a stock portfolio worth $272bn.
What investors think
To discover what other investors believe, here is a [heavily edited] selection of online comments I found:
* “He seems very reluctant to buy, through lack of opportunity. He probably smells trouble ahead.”
* “Buffett sees the bubble and wants cash to buy post-crash.”
* “He sees a peak and is just selling at toppy valuations.”
* “He’s building a war chest to buy bargains in the next downturn.”
* “He’s worried about Trump, trade, rising inflation, and interest rates.”
* “He believes market valuations are well above true value and can’t find a better bet than Treasurys.”
* “Buffett says never bet against America, but he’s looking bearish [negative].”
* “He thinks the risk/reward equation for US stocks is not compelling.”
* “He is cleaning house to provide liquidity and reduce volatility for his successors.”
* “He’s cashing out to pay for share buybacks, philanthropy, or care-home costs!”
However, in his latest yearly letter to shareholders, Buffett said he would “never prefer [cash] over the ownership of good businesses”. And though Berkshire sold stocks worth $143bn in 2024, it has almost 200 subsidiaries generating cash for shareholders. He also added, “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities”.
I agree, but will keep our Berkshire shares for now!
