Warren Buffett, the 94-year-old chief executive officer of Berkshire Hathaway (BRK.A 1.53%) (BRK.B 1.31%), has helped the giant conglomerate build an equities portfolio that is now worth north of $315 billion. In this portfolio are 45 stocks. Of this group, Berkshire's top three positions are Apple, American Express, and Bank of America, which are collectively valued at roughly $168 billion as of Sept. 20. Although the numbers are quite impressive, they still trail the amount of money Buffett and Berkshire have allocated to another asset. That's right, Buffett seems more bullish on this asset than his top three positions combined.
Flocking to safety
The asset I am referring to is not an individual stock. Instead, Berkshire has been buying short-term U.S. Treasury bills at an alarmingly fast rate. At the end of the 2024 second quarter, Berkshire had amassed nearly $235 billion in short-term Treasury bills. That's on top of nearly $38 billion of cash and cash equivalents.
One year ago, Buffett and Berkshire only had about $97 billion of short-term Treasury bills. According to Buffett's cash-flow statement, Berkshire purchased close to $230 billion of Treasuries in the first six months of 2024, although keep in mind that Treasuries were also maturing during this time. To put into context just how large Berkshire's position in Treasury bills is, consider that the company now owns more short-term Treasury bills than the Federal Reserve.
The move gives the impression that Buffett and Berkshire are moving to safety and don't see a ton of value in stocks right now. After all, Berkshire has only purchased about $4.3 billion of stocks through the first half of 2024. Berkshire purchased nearly $16.5 billion of stocks in 2023 and almost $68 billion in 2022.
This isn't necessarily a huge surprise considering the market has been hitting fresh highs all year. Berkshire has even slowed repurchases of its own stock lately. This is likely because the stock has reached a high valuation and the higher a stock is valued, the less appealing repurchases become. On the basis of price to tangible book value, class A shares of Berkshire are now nearing a two-year high.
BRK.A Price to Tangible Book Value data by YCharts
Is Buffett trying to tell investors something?
Buffett and Berkshire may be signaling their belief that the market has gotten too hot and could be due for a pullback. He's certainly not the only investor with this view. The Fed's interest rate hiking campaign was intense and many are concerned that it will eventually tip the economy into a recession.
However, the Fed just added a wrinkle into the story with its recent 50-basis-point (0.5%) cut to the federal funds rate, as the central bank tries to engineer a soft landing for the economy. Lower interest rates are typically a good backdrop for equities, so I'll be interested to see if Buffett and Berkshire make any notable moves in the third quarter or if they remain on the sidelines.
That said, timing the market is a fool's errand. So it's OK to buy stocks with good long-term horizons as long as you're prepared to deal with a pullback or some volatility in the near term.
