For the better part of the last six decades, Berkshire Hathaway (BRK.A -0.16%) (BRK.B -0.44%) CEO Warren Buffett has done his best to run circles around Wall Street's benchmark stock index, the S&P 500 (^GSPC -0.01%). Through the closing bell on May 23, the Oracle of Omaha had overseen a cumulative return of better than 6,120,000% for his company's Class A shares (BRK.A), which is greater than 150 times the total return, including dividends, of the S&P 500 since the mid-1960s.
Buffett's long-term outperformance has been something to marvel at, and it's earned him quite a large following on Wall Street. Every year, some 40,000 investors attend Berkshire Hathaway's annual meeting for a chance to hear Buffett share his thoughts on stocks and the U.S. economy.
Additionally, professional and everyday investors wait on the edge of their seats for the release of Berkshire's Form 13F each quarter to see which stocks he and his team, including top advisors Ted Weschler and Todd Combs have been buying and selling.
But that's the issue... Berkshire's boss and his team have been doing a lot more selling than buying, of late -- and Buffett's latest warning to Wall Street is his biggest yet.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Warren Buffett has been a net seller of stocks for 10 straight quarters
Although investors can get the specifics of which stocks the Oracle of Omaha has been buying and selling, Berkshire Hathaway's quarterly cash flow statements paint a far more detailed picture. Specifically, Berkshire's income statements show how much Buffett and his team cumulatively spent buying equities in the latest quarter, as well as how much Berkshire's chief and his team collectively sold.
During the March-ended quarter, Berkshire's investment team purchased $3.183 billion in equities and sold $4.677 billion, which works out to net selling activity of $1.494 billion.
For 10 consecutive quarters, Buffett and his crew have been persistent net sellers of stocks, to the tune of $174.4 billion. This selling activity hit a crescendo last year, with Buffett overseeing a meaningful pare down of Berkshire Hathaway's stakes in Apple and Bank of America.
To this point, Buffett's consistent net selling activity since Oct. 1, 2022, has served as his big warning to Wall Street. It's called into question the stock market's historically pricey valuation, as well as reinforced something Berkshire's chief noted in his latest annual letter to shareholders: "Often, nothing looks compelling."
But there's now an even bigger warning for Wall Street, courtesy of the stock market's most-revered money manager.
The Oracle of Omaha's biggest warning to Wall Street is a true eye-opener
Despite being a net seller of stocks for the previous 30 months, Warren Buffett is unwavering in his belief that investors shouldn't bet against the U.S. economy. Though Berkshire's CEO is fully aware that economic downturns and stock market corrections are inevitable, he astutely understands that recessions and market downturns are short-lived. Wagering on U.S. economic growth and stock market upside has been the smart move for long-term investors.
However, the one aspect of Buffett's investment philosophy that supersedes his long-term optimism for America and stocks is his unending desire to get a good deal.
Warren Buffett is a value investor who's demonstrated an unwillingness to bend when even beloved companies are no longer attractively priced. Until recently, being a net seller of stocks in Berkshire's investment portfolio had demonstrated this desire to get a good deal -- but there's now an even bigger warning.
Between July 2018 and June 2024, Buffett green-lit the repurchase of nearly $78 billion worth of Berkshire Hathaway stock. Buying back his company's stock for 24 consecutive quarters offered a way for Berkshire's chief to reward long-term investors and ultimately make his company's stock more fundamentally attractive by providing a boost to earnings per share.
But for three consecutive quarters (July 1, 2024 – March 31, 2025), Buffett hasn't spent a dime buying back shares of his own company. The reason is almost certainly due to Berkshire Hathaway stock trading at a 60% to 80% premium to its book value. Between mid-2018 and mid-2024, this premium had hovered between 30% and 60% above book.
There's no greater warning to Wall Street than Warren Buffett firmly depressing the brakes on repurchasing shares of his favorite stock -- i.e., his own company.
Image source: Getty Images.
Stocks are expensive -- but Buffett's patience has historically paid off
If the Oracle of Omaha is willing to put his foot down and not purchase shares of his own company, it demonstrates just how pricey stocks are at the moment.
In mid-February, when the benchmark S&P 500 hit its record-closing high, the so-called "Buffett indicator" did, as well. The Buffett indicator divides the aggregate value of all U.S. publicly traded companies by U.S. gross domestic product (GDP).
When back-tested to the start of 1970, the Buffett indicator has averaged a reading of 85%. In other words, the cumulative value of all public stocks has equated to roughly 85% of U.S. GDP. In mid-February, the Buffett indicator hit its all-time high of 205.5%!
The S&P 500's Shiller price-to-earnings (P/E) ratio tells a similar story. This valuation tool, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), hit a multiple of nearly 39 in December 2024. For context, the Shiller P/E has averaged a multiple of a little over 17 when back-tested 154 years.
S&P 500 Shiller CAPE Ratio data by YCharts.
Both of these tools point to value being virtually nonexistent on Wall Street at the moment.
The silver lining here is that Warren Buffett's patience has proved quite profitable over the years. Being disciplined enough to sit on his proverbial hands and wait for valuations to come into his wheelhouse is a trait that's made Berkshire's chief a phenomenal investor.
For example, one of the few stocks Buffett has been loading up on is satellite radio operator and legal monopoly Sirius XM Holdings (SIRI -3.10%). Berkshire currently owns a greater than 35% stake in the company.
Whereas the Shiller P/E is at its third-priciest valuation during a continuous bull market in a period spanning more than 150 years, Sirius XM is valued around a forward P/E ratio of 7, which is a stone's throw from its historic low as a public company of 31 years. Being the lone satellite radio operator, and generating the bulk of its revenue from subscriptions, as opposed to advertising like traditional radio companies, places Sirius XM stock in favorable risk-versus-reward scenario.
Despite Warren Buffett's biggest warning to Wall Street yet, history shows that Berkshire's shareholders, and long-term investors as a whole, are still sitting pretty.
