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Globe and Mail
3 days ago
- Business
- Globe and Mail
This Is Warren Buffett's Biggest Warning to Wall Street Yet
For the better part of the last six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has done his best to run circles around Wall Street's benchmark stock index, the S&P 500 (SNPINDEX: ^GSPC). Through the closing bell on May 23, the Oracle of Omaha had overseen a cumulative return of better than 6,120,000% for his company's Class A shares (BRK.A), which is greater than 150 times the total return, including dividends, of the S&P 500 since the mid-1960s. Buffett's long-term outperformance has been something to marvel at, and it's earned him quite a large following on Wall Street. Every year, some 40,000 investors attend Berkshire Hathaway's annual meeting for a chance to hear Buffett share his thoughts on stocks and the U.S. economy. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Additionally, professional and everyday investors wait on the edge of their seats for the release of Berkshire's Form 13F each quarter to see which stocks he and his team, including top advisors Ted Weschler and Todd Combs have been buying and selling. But that's the issue... Berkshire's boss and his team have been doing a lot more selling than buying, of late -- and Buffett's latest warning to Wall Street is his biggest yet. Warren Buffett has been a net seller of stocks for 10 straight quarters Although investors can get the specifics of which stocks the Oracle of Omaha has been buying and selling, Berkshire Hathaway's quarterly cash flow statements paint a far more detailed picture. Specifically, Berkshire's income statements show how much Buffett and his team cumulatively spent buying equities in the latest quarter, as well as how much Berkshire's chief and his team collectively sold. During the March-ended quarter, Berkshire's investment team purchased $3.183 billion in equities and sold $4.677 billion, which works out to net selling activity of $1.494 billion. For 10 consecutive quarters, Buffett and his crew have been persistent net sellers of stocks, to the tune of $174.4 billion. This selling activity hit a crescendo last year, with Buffett overseeing a meaningful pare down of Berkshire Hathaway's stakes in Apple and Bank of America. To this point, Buffett's consistent net selling activity since Oct. 1, 2022, has served as his big warning to Wall Street. It's called into question the stock market's historically pricey valuation, as well as reinforced something Berkshire's chief noted in his latest annual letter to shareholders: " Often, nothing looks compelling." But there's now an even bigger warning for Wall Street, courtesy of the stock market's most-revered money manager. The Oracle of Omaha's biggest warning to Wall Street is a true eye-opener Despite being a net seller of stocks for the previous 30 months, Warren Buffett is unwavering in his belief that investors shouldn't bet against the U.S. economy. Though Berkshire's CEO is fully aware that economic downturns and stock market corrections are inevitable, he astutely understands that recessions and market downturns are short-lived. Wagering on U.S. economic growth and stock market upside has been the smart move for long-term investors. However, the one aspect of Buffett's investment philosophy that supersedes his long-term optimism for America and stocks is his unending desire to get a good deal. Warren Buffett is a value investor who's demonstrated an unwillingness to bend when even beloved companies are no longer attractively priced. Until recently, being a net seller of stocks in Berkshire's investment portfolio had demonstrated this desire to get a good deal -- but there's now an even bigger warning. Between July 2018 and June 2024, Buffett green-lit the repurchase of nearly $78 billion worth of Berkshire Hathaway stock. Buying back his company's stock for 24 consecutive quarters offered a way for Berkshire's chief to reward long-term investors and ultimately make his company's stock more fundamentally attractive by providing a boost to earnings per share. But for three consecutive quarters (July 1, 2024 – March 31, 2025), Buffett hasn't spent a dime buying back shares of his own company. The reason is almost certainly due to Berkshire Hathaway stock trading at a 60% to 80% premium to its book value. Between mid-2018 and mid-2024, this premium had hovered between 30% and 60% above book. There's no greater warning to Wall Street than Warren Buffett firmly depressing the brakes on repurchasing shares of his favorite stock -- i.e., his own company. Stocks are expensive -- but Buffett's patience has historically paid off If the Oracle of Omaha is willing to put his foot down and not purchase shares of his own company, it demonstrates just how pricey stocks are at the moment. In mid-February, when the benchmark S&P 500 hit its record-closing high, the so-called "Buffett indicator" did, as well. The Buffett indicator divides the aggregate value of all U.S. publicly traded companies by U.S. gross domestic product (GDP). When back-tested to the start of 1970, the Buffett indicator has averaged a reading of 85%. In other words, the cumulative value of all public stocks has equated to roughly 85% of U.S. GDP. In mid-February, the Buffett indicator hit its all-time high of 205.5%! The S&P 500's Shiller price-to-earnings (P/E) ratio tells a similar story. This valuation tool, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), hit a multiple of nearly 39 in December 2024. For context, the Shiller P/E has averaged a multiple of a little over 17 when back-tested 154 years. S&P 500 Shiller CAPE Ratio data by YCharts. Both of these tools point to value being virtually nonexistent on Wall Street at the moment. The silver lining here is that Warren Buffett's patience has proved quite profitable over the years. Being disciplined enough to sit on his proverbial hands and wait for valuations to come into his wheelhouse is a trait that's made Berkshire's chief a phenomenal investor. For example, one of the few stocks Buffett has been loading up on is satellite radio operator and legal monopoly Sirius XM Holdings (NASDAQ: SIRI). Berkshire currently owns a greater than 35% stake in the company. Whereas the Shiller P/E is at its third-priciest valuation during a continuous bull market in a period spanning more than 150 years, Sirius XM is valued around a forward P/E ratio of 7, which is a stone's throw from its historic low as a public company of 31 years. Being the lone satellite radio operator, and generating the bulk of its revenue from subscriptions, as opposed to advertising like traditional radio companies, places Sirius XM stock in favorable risk-versus-reward scenario. Despite Warren Buffett's biggest warning to Wall Street yet, history shows that Berkshire's shareholders, and long-term investors as a whole, are still sitting pretty. Should you invest $1,000 in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $826,263!* Now, it's worth noting Stock Advisor 's total average return is978% — a market-crushing outperformance compared to170%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Yahoo
21-05-2025
- Business
- Yahoo
58% of Warren Buffett's $287 Billion Portfolio at Berkshire Hathaway Is Invested in Just 4 Unstoppable Stocks
Warren Buffett's outsize investment returns since the mid-1960s have earned him a huge following on Wall Street. Form 13Fs -- filed on May 15 -- allow investors to see which stocks Buffett purchased and sold in the latest quarter. Buffett is a big fan of having a sizable percentage of Berkshire Hathaway's capital invested in his best ideas. 10 stocks we like better than Apple › For decades, no money manager has commanded the attention of Wall Street professionals and everyday investors quite like Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) Warren Buffett. This reverence derives from his jaw-dropping outperformance of the benchmark S&P 500 since becoming CEO 60 years ago. In that period, he's overseen a greater than 6,230,000% aggregate return in his company's Class A shares (BRK.A), which compares to a total return, including dividends, of around 39,700% for the S&P 500 over the same timeline. It's been a big couple of weeks for Berkshire Hathaway and the Oracle of Omaha's shareholders. At the company's annual shareholder meeting on May 3, Berkshire unveiled its first-quarter operating results, and Buffett announced his plan to step down as CEO by the end of the year. Predetermined successor Greg Abel is set to take the reins upon Buffett's departure. But this wasn't the only jaw-dropper of the month. On May 15, Berkshire Hathaway filed its Form 13F with the Securities and Exchange Commission. This filing details which stocks Buffett and his top advisors purchased and sold in the most recent quarter. In particular, Berkshire's 13F highlights what may well be Warren Buffett's best-known investment prowess: his penchant for portfolio concentration. Both he and now-late right-hand man Charlie Munger long believed in putting an outsize percentage of their company's capital to work in their best ideas. Following the release of Berkshire's 13F, Warren Buffett has roughly 58% of his company's $287 billion portfolio invested in just four unstoppable stocks. Although Apple (NASDAQ: AAPL) remains Berkshire Hathaway's largest holding by a fairly significant amount, this position is a far cry from what it once was. At the end of September 2023, Berkshire held 915,560,382 shares of Apple. But as of March 31, 2025, this position had "dwindled" to 300,000,000 shares. If Buffett hadn't sold a single share, this original stake would now be worth $193.4 billion. Despite never being too tech-savvy, Warren Buffett's love for Apple stock stems from his understanding of consumer behaviors. Apple's customers tend to be incredibly loyal to the brand and are willing to pay a premium price for the company's products. This loyalty has come in especially handy with Apple CEO Tim Cook overseeing the steady buildout of his company's services segment. Locking customers into subscription-based services not only enhances existing loyalty, but it should meaningfully improve Apple's operating margin over time, as well as lessen the revenue peaks and troughs associated with iPhone replacement cycles. Something else the Oracle of Omaha is a big fan of is Apple's premier capital-return program. Inclusive of Apple's $49.5 billion in share repurchases undertaken in the first six months of fiscal 2025 (its fiscal year ends in late September), it's bought back around $775 billion worth of its common stock since initiating a repurchase program in 2013. This is helping to grow Berkshire's stake in Apple without Buffett having to do a thing. Despite Buffett not purchasing any shares of credit-services provider American Express (NYSE: AXP) for a long time, this "indefinite" holding -- shares have been continuously held by Berkshire since 1991 -- has worked its way up to $45.4 billion in market value and is Berkshire Hathaway's second-largest holding behind Apple. The secret to AmEx's success has been its ability to double-dip during long-winded periods of economic expansion. It's the No. 3 payment processor by credit card network purchase volume in the U.S., which means it's a trusted name for payment facilitation. In addition to generating fees from merchants for processing transactions, American Express also acts as a lender, which generates the company interest income and/or annual fees from cardholders. Similar to Wells Fargo on the banking front, American Express has demonstrated a knack for attracting high earners as cardholders. Individuals with higher incomes are less likely to alter their buying habits during periods of economic turbulence, and they (often) continue to pay their bills. This dynamic positions AmEx to navigate economic downturns better than most lending institutions. Warren Buffett is generating a monster yield in American Express, as well. Relative to Berkshire Hathaway's cost basis of around $8.49 per share in its No. 2 holding, AmEx's $3.28 per share base annual payout works out to a yield on cost of 38.6%! If you think American Express has been a fixture in Berkshire Hathaway's investment portfolio, let me introduce you to well-known consumer goods giant Coca-Cola (NYSE: KO), which has been a continuous holding since 1988. Thanks to an enormous yield on cost, which I'll touch on in a few moments, this is a position that neither Buffett, nor his successor Abel, are likely to ever sell. Coca-Cola's products and geographic diversity are its foundation. Since its sells beverages, which are a basic necessity, it's pretty well insulated from recessions. Further, with operations ongoing in all but three countries (North Korea, Cuba, and Russia), Coca-Cola has the ability to generate predictable cash flow in developed countries, while moving the organic growth needle in faster-paced emerging markets. Perhaps no consumer goods company has done a better job of building its brand and engaging with current and prospective consumers than Coca-Cola. It's leaned into artificial intelligence (AI) and digital media channels as a way to relate to younger audiences. Meanwhile, it has more than a century of history and well-known brand ambassadors that can be relied on to connect with mature consumers. In February, Coca-Cola increased its base annual payout for a 63rd consecutive year. Taking into account that Berkshire Hathaway's cost basis on its 400,000,000 shares of Coca-Cola is $3.2475 per share, the new $2.04 annual dividend equates to a yield on cost of (drum roll) 62.8%! Buffett's company is more than doubling its initial investment in Coca-Cola from dividends alone every 21 months. Lastly, there's money-center goliath Bank of America (NYSE: BAC), which has fallen from Berkshire's No. 2 holding to No. 4 in recent quarters. Berkshire's 13F shows that 48,660,056 shares of BofA were sold during the first quarter. Since July 17, 2024, more than 401 million shares of what was a greater than 1.03-billion-share stake in Bank of America have been sent to the chopping block. The reason the Oracle of Omaha loves financial stocks -- aside from it being a sector he understands well -- is because they're cyclical. Instead of trying to guess when inevitable economic downturns will take shape, Buffett has positioned Berkshire's investment portfolio (and owned assets) to take advantage of disproportionately long periods of economic growth. When the U.S. economy enters one of these multiyear growth spurts, it allows banking giants like BofA to prudently grow their loan portfolio. Speaking of loans, Bank of America is the most interest-sensitive of all U.S. money-center banks. When the Federal Reserve rapidly increased the federal funds rate from March 2022 to July 2023, no bank enjoyed a bigger boost to its net interest income. Although the Fed is now in a rate-easing cycle, which is typically bad news for the interest income-earning potential of banks, the nation's central bank is slow-stepping and telegraphing its moves, and thereby allowing BofA to continue to make high-interest loans. To round things out and keep with the theme, Bank of America has a sizable capital-return program. It's doling out $1.04 per share in annual dividends, and its share repurchase program has reduced its outstanding share count by nearly 29% since 2017. Retiring a good chunk of the company's share count has undoubtedly been a positive for BofA's earnings per share. Before you buy stock in Apple, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Apple wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Bank of America is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America and Wells Fargo. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy. 58% of Warren Buffett's $287 Billion Portfolio at Berkshire Hathaway Is Invested in Just 4 Unstoppable Stocks was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
10-05-2025
- Business
- Yahoo
Warren Buffett Bought $78 Billion of His Favorite Stock Like Clockwork for 6 Years -- but He's Now Gone 9 Months Without Buying a Single Share
Warren Buffett -- who announced plans to step aside as CEO at the end of the year -- has overseen an annualized return of nearly 20% for Berkshire Hathaway's Class A shares (BRK.A) since the mid-1960s. Berkshire's chief purchased shares of his favorite stock for 24 consecutive quarters (July 2018 - June 2024). However, nine straight months without a single purchase signifies one big issue with the apple of Buffett's eye. 10 stocks we like better than Berkshire Hathaway › This has been a monumental week for investing extraordinaire Warren Buffett and his company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). This past Saturday, May 3, at Berkshire Hathaway's annual shareholder meeting, the Oracle of Omaha thrust an announcement on the roughly 40,000 in attendance that he aims to step down as CEO by the end of the year and allow his predetermined successor, Greg Abel, to grab the reins. It was an inevitable announcement for the 94-year-old who's overseen a nearly 20% annualized return his company's Class A shares (BRK.A) over 60 years. What's made Buffett all the more popular is that he's delivered these outsized returns without fancy charting programs or investing software. Berkshire's chief often seeks out time-tested businesses with outstanding management teams that offer sustained competitive advantages and, in many instances, robust capital-return programs. Riding Buffett's coattails over many years or decades has been a formula for success. However, not all of Warren Buffett's trading activity at Berkshire Hathaway can be found in the company's quarterly filed Form 13F. This is the filing that provides a concise snapshot of what Buffett and his team purchased and sold in the most recent quarter. To uncover the stock Buffett bought like clockwork for six years -- but suddenly hasn't purchased a share of for nine consecutive months -- you'll need to dig a bit deeper. Investors wanting to know which stock Warren Buffett has bought more than any other since the midpoint of 2018 would be wise to dig into Berkshire Hathaway's quarterly operating reports. Toward the end of each report, prior to the executive certifications, you'll find detailed purchasing information on the Oracle of Omaha's favorite stock to buy... which happens to be shares of his own company, Berkshire Hathaway. Before July 2018, share buybacks could only be undertaken if Berkshire's stock fell to or below 120% of book value (i.e. no more than a 20% premium above book value in the most recent quarter). Since Berkshire's stock regularly vacillated between a 30% and 60% premium to book value, Buffett and his now-late right-hand man Charlie Munger weren't able to deploy a single cent for buybacks. Things changed on July 17, 2018, which is when Berkshire's board amended the company's buyback rules to allow Buffett to get off the proverbial bench. The new criteria allow for buybacks with no ceiling or end date, as long as the two caveats are met. First, Berkshire must have at least $30 billion in cash, cash equivalents, and U.S. Treasuries (combined) on its balance sheet; and secondly, Buffett must view his company's shares as intrinsically cheap. The built-in ambiguity of the second criterion gives Berkshire's chief the liberty to deploy his company's capital for buybacks as he sees fit. For a six-year period (July 2018 – June 2024), Buffett repurchased shares of Berkshire Hathaway stock like clockwork. While there were few months here and there where no buybacks were completed, the Oracle of Omaha spent almost $78 billion to repurchase more than 12% of his company's outstanding shares over 24 quarters. However, what stands out in hindsight isn't this 24-quarter streak of buybacks. Rather, it's the third consecutive quarter (a nine-month stretch) of Berkshire's chief passing on buying shares of his own company. To clear the air, Warren Buffett is an unwavering optimist who'd never bet against the American economy or the stock market. Though he recognizes that economic recessions and stock market corrections are inevitable, decades of investing have wisely taught him that periods of economic growth and bull markets last substantially longer than downturns. As such, he's positioned his company to take full advantage of this simple numbers game. But just because Berkshire's chief is an unabashed optimist, it doesn't mean he'll chase pricey stocks higher -- and this includes shares of his own company. Berkshire Hathaway stock spent much of its time vacillating between a 30% and 60% premium to book value (i.e., 130% to 160% of book) over the last 15 years. This range has afforded Buffett ample opportunity to reduce his company's outstanding share count via repurchases. Yet entering last weekend, Berkshire Hathaway stock was nearing an 80% premium to its listed book value. This is a level Buffett's company hasn't seen in more than 16 years, and it's proved too high of a price for the Oracle of Omaha to pay, even with a record $347.7 billion in cash at the ready. Warren Buffett passing on buying shares of his favorite stock is part of a bigger problem: historically pricey stock valuations. In December, the S&P 500's (SNPINDEX: ^GSPC) Shiller price-to-earnings (P/E) Ratio (also known as the cyclically adjusted P/E Ratio, or CAPE Ratio) peaked at nearly 39. This valuation tool, which takes into account average inflation-adjusted earnings over the last 10 years, has an average multiple of 17.23, when back-tested 154 years. It entered 2025 at its third-priciest multiple during a continuous bull market in history. Since January 1871, there have been a half-dozen instances, including the present, where the S&P 500's Shiller P/E topped 30. Following the five prior occurrences, the benchmark index lost 20% or more of its value. This is to say that when stock valuations become overly extended to the upside, big declines have always followed. Warren Buffett has no intention of attempting to "time" the market. But he does have a knack for identifying price dislocations in amazing businesses, which can include his own in due time. Buffett is very clearly waiting for valuations to become more attractive before putting some of his company's nearly $348 billion in cash to work. Until Berkshire Hathaway's premium to book value retreats to 60% or below, it's unlikely the Oracle of Omaha will be a buyer. Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $623,103!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $717,471!* Now, it's worth noting Stock Advisor's total average return is 909% — a market-crushing outperformance compared to 162% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 5, 2025 Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy. Warren Buffett Bought $78 Billion of His Favorite Stock Like Clockwork for 6 Years -- but He's Now Gone 9 Months Without Buying a Single Share was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
