For the last 60 years, Berkshire Hathaway's (BRK.A 0.68%)(BRK.B 0.53%) billionaire CEO, Warren Buffett, has been virtually unstoppable. Even with an occasional underperforming year sprinkled in here and there, the Oracle of Omaha has overseen an aggregate return in his company's Class A shares (BRK.A) of 5,884,143%, as of the closing bell on June 18. For the sake of comparison, the benchmark S&P 500 has climbed by around 40,000%, including dividends, since the mid-1960s.
Such an overwhelming outperformance of Wall Street's encompassing stock index has professional and everyday investors riding Buffett's coattails to long-term gains. This can be done by tracking Berkshire Hathaway's trading activity via quarterly filed Form 13Fs and mirroring it.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Buffett's investment success isn't based on luck, and a nearly 5,884,143% cumulative return doesn't happen by accident. It's the result of Berkshire's CEO sticking to a set of unwritten rules that guide his investment philosophy. While some of these "rules" have proved fungible, on rare occasion, throughout the years, there's one investing rule the Oracle of Omaha refuses to bend -- and it fully explains why he's been a net seller of stocks since October 2022.
Billionaire Warren Buffett is a disciplined investor most of the time
One of the most tried-and-true investment philosophies Warren Buffett lives by is the idea of long-term investing. Instead of trying to guess when short-lived stock market corrections, bear markets, or economic recessions will take place, he purchases businesses or makes acquisitions that can take advantage of long-winded periods of growth. Some of Buffett's top-performing investments, in terms of unrealized gains, have been held for multiple decades, such as Coca-Cola, American Express, and Moody's.
But even Berkshire's billionaire CEO has been tempted by a short-term trade before. During Berkshire Hathaway's 2022 annual meeting, Buffett told attendees that his company's stake in gaming colossus Activision Blizzard, which was subsequently acquired by Microsoft for $95 per share in cash, was for arbitrage purposes.
NYSE: BRK.B
Key Data Points
When Buffett and his team of top advisors were building up a position in Activision Blizzard, shares of the company were vacillating in the high $70s and low $80s. Assuming the deal received the thumbs-up from regulators, this short-term arbitrage would disappear, which is precisely what wound up happening. However, Berkshire's brightest investment minds notably reduced their stake in Activision Blizzard before the deal got the OK from regulators.
The Oracle of Omaha also tends to avoid companies that have a lot of long-term debt on their balance sheet. Taking stakes in financially flexible businesses is a smart investment strategy in all economic climates.
Despite his general avoidance of debt-laden businesses, Buffett has been piling into integrated oil and gas company Occidental Petroleum (OXY +1.28%) for more than three years. He's acquired close to 265 million shares of Occidental's common stock, which is a bit of a head-scratcher given that it has quite a bit of debt on its balance sheet. Although a higher spot price for oil did help Occidental Petroleum lower its net debt, it offers far less financial flexibility than a company we'd typically see as a core holding in Berkshire Hathaway's $279 billion investment portfolio.
Image source: Getty Images.
Buffett isn't breaking this investment rule -- and it shows why he's a net seller of stocks
Though Warren Buffett has demonstrated a willingness to deviate, on rare occasion, from his unwritten investing rules, there's one rule that's proved unbendable.
The investing rule Berkshire's billionaire chief holds most sacred is that of getting a good deal. Paying an appropriate price for a stake in a wonderful business is paramount to success for the Oracle of Omaha. Regardless of how profitable a company is or how revered its management team may be, Buffett won't chase a stock higher if he doesn't perceive the shares to be trading a subjectively fair price.
Buffett's willingness to dig in his heels and wait for stock valuations to come into his wheelhouse helps to explain why Wall Street's most-followed money manager has been a persistent seller of stocks for 30 months (and counting).
Every quarter, Berkshire Hathaway's operating results contain a consolidated cash flow statement that allows investors to determine whether or not Buffett and his team were net buyers or sellers of stocks. For 10 consecutive quarters, Buffett has been a net seller, to the tune of $174.4 billion (on a cumulative basis).
Despite having an all-time record $347.7 billion in cash, cash equivalents, and U.S. Treasuries at his disposal on Berkshire Hathaway's balance sheet, Buffett has virtually no incentive to put this capital to work due to historically stretched stock valuations.
Warren Buffett Indicator jumps to 200% and is now just 2 percentage points away from the most expensive stock market valuation in history 🚨🚨 pic.twitter.com/Qajxn2B2JM
-- Barchart (@Barchart) June 10, 2025
Nearly a quarter of a century ago, in 2001, Berkshire's CEO conducted an interview with Fortune magazine where he 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 adds up the value of all U.S. public companies and divides it 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 multiple of 0.85, or 85%. This is to say that the cumulative value of all public stocks has averaged approximately 85% of U.S. GDP over the last 55 years. Last week, the Buffett Indicator nearly hit 201%, and it's within a stone's throw of its all-time high of 205.55%, which was achieved in mid-February. Put simply, stocks have never been more expensive, based on this back-tested valuation tool.
There's no easy remedy to the stock market being this pricey; and Warren Buffett has demonstrated a willingness to sit on his hands and wait patiently until valuations makes sense.
If there's a silver lining to this $174 billion "warning" Buffett has provided to Wall Street and investors, it's that his patience and unwavering focus on long-term investing and value have previously paid off handsomely for Berkshire Hathaway's shareholders. Snagging price dislocations, such as Bank of America in 2011, demonstrates the value of waiting until valuations come into Buffett's wheelhouse.
But given just how far outside of historical norms the Buffett Indicator is at the moment, it's become unlikely that a meaningful portion of Berkshire's treasure chest gets put to work before Warren Buffett steps down as CEO by the end of the year and hands the reins over to Greg Abel.
