One of the best aspects of putting your money to work on Wall Street is that it's freer and fairer than ever. Most brokerages have eliminated minimum deposit requirements and commission fees associated with common stock trades on major U.S. exchanges. Additionally, investors have access to income statements, balance sheets, investor presentations, and a host of economic data at the click of a button.
One of the most important data releases each quarter occurred just three weeks ago – and I'm not talking about any specific earnings report or the monthly inflation report. Feb. 14 marked the deadline for institutional investors with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
A 13F provides a snapshot that allows investors to see which stocks Wall Street's leading money managers purchased and sold in the latest quarter (in this case, the December-ended quarter). While there are dozens of asset managers that make waves on Wall Street, no money manager garners attention quite like Berkshire Hathaway's (BRK.A 0.39%)(BRK.B 0.27%) billionaire CEO, Warren Buffett.
The appropriately named "Oracle of Omaha" is overseeing a 44-stock, $294 billion portfolio at Berkshire, which is highly concentrated into a few of his best ideas. But what you might not realize is that Berkshire Hathaway's quarterly 13F doesn't tell the complete story about what's under the hood.
Warren Buffett has a $586 million "secret" portfolio
Although Berkshire Hathaway has made in the neighborhood of five dozen acquisitions with Warren Buffett at the helm, one in particular stands out.
In 1998, Berkshire acquired reinsurance company General Re in an all-share deal valued at $22 billion. While the purpose of this deal was to incorporate General Re's reinsurance operations into the fold, General Re was also the parent of a specialty investment firm known as New England Asset Management (NEAM). When this buyout was completed in December 1998, Berkshire became the new owner of NEAM.
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Key Data Points
NEAM oversees well in excess of the $100 million AUM threshold required for 13F reporting. In other words, it's required to file a 13F each quarter that outlines which stocks and exchange-traded funds (ETFs) were bought and sold.
Even though Buffett doesn't oversee the trading activity of NEAM in the same way he does for Berkshire Hathaway's $294 billion portfolio, what New England Asset Management owns is, ultimately, part of Berkshire Hathaway. Thus, NEAM can be viewed as Warren Buffett's "secret" portfolio.
As of the end of 2024, Buffett's secret portfolio had $585.5 million of invested assets spread across 121 holdings. Over the last two years, the largest holdings for NEAM have been highly diversified, low-cost ETFs and index funds, such as the SPDR S&P 500 ETF Trust, which attempts to mirror the performance of the benchmark S&P 500 (^GSPC 1.33%).
Despite NEAM being a separately run portfolio, New England Asset Management and Buffett's $294 billion portfolio at Berkshire share a common theme: net stock selling.
Image source: Getty Images.
The Oracle of Omaha's hidden portfolio has been a net seller of stocks for two years
According to Berkshire Hathaway's cash flow statements, Warren Buffett has been a net seller of stocks in each of the last nine quarters, with selling activity really picking up in 2024 via top holdings Apple and Bank of America. On a cumulative basis, Berkshire's chief has overseen $173 billion in net-equity sales since Oct. 1, 2022.
But it's a similar story for New England Asset Management. When 2022 ended, Buffett's secret portfolio had $5.43 billion invested across 117 holdings. But as of Dec. 31, 2024, the invested value of this portfolio has been reduced by $4.85 billion, or more than 89%, to $585.5 million.
This great-minds-think-alike moment probably has everything to do with the stock market being historically pricey.
Almost a quarter of a century ago, in an interview with Fortune magazine, Warren Buffett referred to the market-cap-to-GDP ratio as "probably the best single measure of where valuations stand at any given moment." This ratio, which divides the cumulative market cap of publicly traded stocks by U.S. gross domestic product (GDP), has come to be known as the "Buffett Indicator."
When back-tested to 1970, the Buffett Indicator has averaged a reading of 85% -- i.e., the total market cap of all U.S. stocks equals around 85% of U.S. GDP. On Feb. 18, 2025, the Buffett Indicator hit an all-time high of more than 207%!
S&P 500 Shiller CAPE Ratio data by YCharts.
But this isn't the only warning sign that stocks are pricey. The S&P 500's Shiller price-to-earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), is hitting historic levels. The Shiller P/E is based on average, inflation-adjusted earnings over the last 10 years.
When back-tested 154 years (to January 1871), the S&P 500's Shiller P/E has averaged a multiple of 17.21. As of the closing bell on March 3, the Shiller P/E stood at 36.85, which isn't too far below its closing high of 38.89 during the current bull market rally. This marks the third-highest level the Shiller P/E has achieved during a continuous bull market since January 1871.
Expanding the lens a bit wider, there have been six instances, including the present, where the S&P 500's Shiller P/E has surpassed 30 for a period of at least two months. The previous five occurrences all, eventually, resulted in the S&P 500 shedding at least 20% of its value.
Warren Buffett and New England Asset Management's investment team are ardent value investors who aren't shy about sitting on their hands and/or selling stocks when things seem pricey. While the Oracle of Omaha has a phenomenal track record of pouncing on wonderful companies when price dislocations occur, the stock market appears to be a ways away from offering a value proposition.
Unless a sizable stock market correction takes shape, expect the $294 billion portfolio overseen by Buffett, as well as his "secret" $586 million portfolio supervised by the investment advisors at New England Asset Management, to remain net sellers of stocks.
