For more than half a decade, Warren Buffett’s Berkshire Hathaway accumulated the same stock quarter after quarter, 23 straight times, to be exact. Then, without warning, the buying stopped last year.
It wasn’t because Buffett lost faith in the company. In fact, his recent moves suggest he’s been biding his time, waiting for the numbers and the price to line up again.
Key Points
-
Buffett Paused Buying, ended a 23-quarter streak, sold major stakes, and built $344B cash.
-
Valuation at Buy Zone, Berkshire now trades near Buffett’s 1.5x book value buy signal.
-
Catalyst Ahead, could resume buybacks soon, a historically bullish move.
Selling While the Market’s Hot
Buffett has been unusually restrained in this market. For almost 3 years, Berkshire has been a net seller of stocks, something we haven’t seen on this scale in decades. In just the last five quarters, he’s offloaded large chunks of Berkshire’s Apple and Bank of America holdings.
That selling spree helped push Berkshire’s cash reserves to nearly $350 billion. The pause in buying this once-favorite stock isn’t a market-timing gamble.
If something sells for well above its intrinsic value, he’s happy to take the premium and wait for a bargain, even if that means holding an enormous cash pile.
Valuation Trigger Buffett Watches Closely
When Berkshire updated its buyback policy in 2018, it gave Buffett the freedom to repurchase shares anytime the stock traded below his conservative estimate of intrinsic value. Between then and May 2024, he spent $78 billion on Berkshire share repurchases. But for the past year and change, not a single dollar.
The reason seems to be Berkshire’s own stock hasn’t looked cheap enough by his yardstick, until now. Shares have slid since Buffett announced he’d step down as CEO at the end of the year, and the post–earnings drop in August has pulled the price-to-book ratio down to roughly 1.5. That’s the same territory where Buffett last went on a major buying spree.
Interestingly, the 1.5x book value mark isn’t arbitrary. Historically, Buffett has treated it as a sort of “green light” level for repurchases, because it means Berkshire is trading near the value of its businesses plus its massive investment portfolio, with little to no premium.
Why Berkshire’s Earnings Look Worse Than They Really Are
Berkshire’s latest quarter rattled some investors. Insurance profits normalized thanks partly to massive wildfire payouts in California.
Operating earnings dipped 4%, and foreign exchange headwinds shaved off even more. The headline shocker was a $5 billion write-down on Kraft Heinz, on top of a $3 billion impairment back in 2019.
But underneath those one-off hits, book value per share climbed 2.1% from the prior quarter and nearly 11% year-over-year. That’s an important signal is the underlying businesses, from BNSF Railway to GEICO, are still compounding value.
2 Reasons Buffett Could Still Wait
There are a couple of hurdles before Buffett pounces. First, a chunk of Berkshire’s book value comes from its $300+ billion equity portfolio.
If he thinks those holdings are still richly priced, he’ll demand a bigger discount before buying back Berkshire stock, otherwise he’s effectively overpaying for the portfolio.
Second, he may be keeping cash in reserve for a different kind of move: bolstering BNSF Railway. The recent Union Pacific–Norfolk Southern merger could reshape the competitive landscape, and Buffett may decide to invest heavily to keep BNSF on equal footing.
Takeaway for Investors
Right now, Berkshire trades near 1.5 times book value, the same ballpark where Buffett last saw a clear buy signal. Combine that with a fortress balance sheet and a leadership team that refuses to buy for the sake of buying, and you have a rare setup, which has the potential for Buffett himself to turn from seller to buyer.