Warren Buffett’s Berkshire Hathaway is making some big moves: cutting back on its Apple shares, selling off Bank of America stock, and piling up a massive cash reserve. By the end of September, Berkshire had $352.2 billion in cash, CNBC reports. So what’s the story? Why is Buffett, one of the world’s most famous investors, offloading so much stock and holding tight to cash?
What’s Driving Buffett’s Cash Stash?
Buffett’s strategy comes down to two main concerns: stock prices being too high and the looming threat of higher capital gains taxes.
Buffett has always been clear about his view on stock prices, saying he only buys back Berkshire’s shares when he thinks they’re trading below the company’s true value. According to The Economist, he recently advised investors to expect more selling and fewer new investments because “he sees few cheap, high-quality companies in which to invest.”
The potential for higher capital gains taxes is also pushing him to cash out now. Buffett expects the government will look to cover its rising deficit by increasing taxes rather than cutting spending. “They may decide that some day they don’t want the fiscal deficit to be this large because that has some important consequences,” he said at Berkshire’s annual meeting in May, according to Reuters. “So they may not want to decrease spending, and they may decide they’ll take a larger percentage of what we own, and we’ll pay it.”
Read More: Warren Buffett’s $127 Billion Warning to Wall Street: What It Could Mean for the Stock Market
What’s Happening with Berkshire’s Portfolio?
Between the second and third quarters of 2024, Berkshire increased its cash pile by 17.4%, reaching $352 billion. In the third quarter alone, CNBC reports that Berkshire sold $36.1 billion in stock, primarily unloading shares of Apple and Bank of America.
Apple has been a massive holding for Berkshire, but Buffett’s been selling off shares for four straight quarters now. Since the start of 2024, Berkshire has sold 605 million shares, about 70% of its original Apple stake, according to The Wall Street Journal. The company still holds roughly $70 billion in Apple shares, but Buffett’s consistent selling points to his concerns over high valuations.
Berkshire also sold about $10 billion in Bank of America stock since mid-July, and for the first time since 2018, the company didn’t repurchase any of its own stock, FactSet noted. It seems Buffett is holding back on buybacks as well, possibly hinting that he doesn’t think it’s a good time to reinvest in Berkshire’s own shares.
What Does This Mean for Investors?
Buffett’s moves have other investors thinking twice. Chris Bloomstran, president of Semper Augustus Investments Group, which owns Berkshire stock, told The Wall Street Journal that Apple’s stock, trading at 30 times projected earnings, is “overvalued given its expected slower growth.”
Buffett has long suggested a simple, steady strategy: keep buying a low-cost S&P 500 index fund over time. But for someone his age—Buffett is 94—he may be less inclined to ride out any big drops in the market. For those who follow his advice, any potential market drop could be a chance to buy stocks at a discount, especially if they’re investing in the market long-term.
So, should you follow Buffett’s lead and hold more cash? That depends. If you’re a long-term investor, staying the course with regular investments could be wise. But if you’re worried about a downturn, Buffett’s cautious approach might be a reminder to keep an eye on valuations and be prepared to adapt if things shift.
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