For the last 60 years, Berkshire Hathaway (BRK.A 0.39%)(BRK.B 0.27%) CEO Warren Buffett has made it a habit to run circles around Wall Street using old-school research tactics and relying on time to be his greatest ally. Since taking the reins in the mid-1960s, he's overseen a jaw-dropping cumulative return of 5,962,825% in his company's Class A shares (BRK.A), as of the closing bell on April 8.
The Oracle of Omaha's outsized returns have earned him quite the following. Both professional and everyday investors eagerly await Berkshire's quarterly Form 13F filings to see which stocks Buffett and his top advisors, Todd Combs and Ted Weschler, have been buying and selling.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Although Warren Buffett is an unwavering value investor and optimist, the long-term investing approach he's preached for decades doesn't always align with his actions over shorter periods.
Warren Buffett's $173 billion warning to Wall Street has proved prescient
As of April 8, Berkshire Hathaway's chief was overseeing a 44-stock, $245 billion investment portfolio. More importantly, Buffett's company closed out 2024 with an all-time record $334.2 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet.
While a record cash balance might be viewed as positive news for most public companies, it's become a somewhat unnerving development over the last two years for investors who closely monitor Berkshire Hathaway and expect Buffett to be an active buyer of stocks.
NYSE: BRK.B
Key Data Points
For nine consecutive quarters (October 2022 through December 2024), Warren Buffett has been a net seller of equities. This is to say that he's overseen the sale of more stocks than have been purchased. Here's the nine-quarter breakdown:
- Q4 2022: $14.64 billion in net-equity sales
- Q1 2023: $10.41 billion
- Q2 2023: $7.981 billion
- Q3 2023: $5.253 billion
- Q4 2023: $0.525 billion
- Q1 2024: $17.281 billion
- Q2 2024: $75.536 billion
- Q3 2024: $34.592 billion
- Q4 2024: $6.713 billion
Collectively, Buffett has sold nearly $173 billion more in stocks than he's purchased in a 27-month period. While he'd never come out and directly say he believes the stock market is pricey, his actions pretty clearly show that his value-first investment approach has struggled to locate bargains.
This $173 billion warning to Wall Street is backed by the "Buffett Indicator" -- i.e., the market-cap-to-U.S.-GDP ratio -- hitting an all-time high above 207% in February, as well as the S&P 500's Shiller price-to-earnings (P/E) Ratio peaking at a closing value of nearly 39 in December. These readings are more than double the Buffett Indicator's 55-year average of 85% and the Shiller P/E's 154-year average multiple of 17.23.
Buffett's investment actions pointed to a coming downdraft for the stock market, which now seems quite prescient.
Image source: Getty Images.
The time to be greedy when others are fearful is rapidly approaching
While most investors aren't fans of stock market corrections, bear markets, or crashes, the fear that arises from these events is precisely what encourages Warren Buffett to put some of Berkshire Hathaway's capital to work.
In a span of four trading sessions (April 3 through April 8), the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have respectively lost 10.9%, 12.1%, and 13.3% of their value. These are declines driven by uncertainty over President Donald Trump's tariff policy, as well as general fear of what's to come for the U.S. economy. But it's also a recipe for price dislocations, which is exactly what the value-focused Buffett is looking for.
For example, Warren Buffett has been purchasing shares of integrated oil and gas giant Occidental Petroleum (OXY +1.82%) with some degree of regularity since the start of 2022. He's overseen the purchase of almost 265 million common shares of Occidental stock.
NYSE: OXY
Key Data Points
The recent tumult on Wall Street has sent the spot price of crude oil careening to a four-year low. Occidental generates a disproportionate percentage of its revenue from its drilling segment, compared to other integrated energy companies, so it's likely to be hit harder by this move lower in the price of oil than its peers.
However, this weakness may be temporary. Years of capital underinvestment from energy majors during the COVID-19 pandemic, coupled with Russia's invasion of Ukraine complicating Europe's energy needs, have tightened global oil supply. With the caveat that the "e" of earnings is somewhat fluid at the moment, Occidental's forward P/E ratio is down to just 9. This could be just the type of fear event that allows Buffett to be greedy.
The same can be said for Berkshire's growing stake in fast-food restaurant chain Domino's Pizza (DPZ +1.42%). Buffett's company built up a 2,382,000-share stake worth north of $1 billion in Domino's during the latter-half of 2024.
NASDAQ: DPZ
Key Data Points
Though Domino's Pizza stock has held up much better than Occidental Petroleum in recent weeks, it's still moved lower. Inflationary concerns, along with the uncertainty of how American brands might be perceived in overseas markets given President Trump's sweeping tariffs, have the potential to slow Domino's growth rate in the very near term.
But this retracement in Domino's stock has also pushed its forward P/E ratio down to 22. This is Its lowest forward P/E ratio in at least a half-decade, and a 21% discount to its average forward earnings multiple over the last five years.
With the stock market crashing, the time to be greedy when others are fearful is rapidly approaching. While the broader market remains historically pricey, select stocks are demonstrating price dislocations that are attractive for long-term investors like the Oracle of Omaha. The time go shopping, and for Buffett to put some of Berkshire's $334 billion treasure chest to work, doesn't appear to be too far off.
