Berkshire Hathaway's (BRK.A -0.55%) (BRK.B -0.52%) billionaire CEO Warren Buffett is widely viewed as Wall Street's greatest money manager. Without relying on fancy charting software or algorithms, the aptly named Oracle of Omaha became one of the richest people in the world and watched Berkshire grow into one of only 11 public companies worldwide to ever hit a $1 trillion valuation.
Buffett's track record -- he's overseen a 5,868,186% cumulative return in Berkshire Hathaway's Class A shares (BRK.A) in six decades -- has earned him a huge following, which includes investors who aim to mirror his trading activity.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
But with Warren Buffett's most-purchased stock over the last seven years recently falling more than 10% as the broad-based S&P 500 and growth-fueled Nasdaq Composite power to fresh all-time highs, the question has to be asked: Has Berkshire's billionaire CEO lost his touch?
Warren Buffett's favorite stock is a company near and dear to his heart
Most investors track the Oracle of Omaha's buying and selling activity by following Berkshire Hathaway's quarterly Form 13F filings. This required filing for institutional investors with at least $100 million in assets under management concisely lists all buying and selling activity from the previous quarter.
However, there's a catch: Buffett's favorite stock to buy isn't listed in his company's quarterly filed 13Fs.
To get the skinny on this top stock, you'll need to dig into Berkshire Hathaway's quarterly operating results. On the final page of each quarterly report, just prior to the executive certifications, you'll find a detailed breakdown of exactly how much Wall Street's most-revered billionaire money manager spent on his favorite stock (cue the dramatic music)... which happens to be shares of his own company.
Prior to July 2018, Warren Buffett and now-late right-hand man Charlie Munger were only allowed to repurchase shares of Berkshire Hathaway stock if it fell to or below 120% of book value (i.e., no more than 20% above listed book value). Unfortunately, Berkshire's stock never fell to or below this line-in-the-sand threshold, which resulted in no buyback activity.
On July 17, 2018, Berkshire's board amended and simplified the rules governing buybacks to two criteria. It allowed the Oracle of Omaha to repurchase shares with no ceiling or end date as long as:
- Berkshire has at least $30 billion in combined cash, cash equivalents, and U.S. Treasuries on its balance sheet; and
- Buffett views shares of his company as intrinsically cheap.
This latter point is purposefully vague so as to give Buffett the discretion to put his company's capital to work via buybacks whenever he feels it's appropriate.
Between July 1, 2018, and March 31, 2025, Berkshire's billionaire chief bought back almost $78 billion worth of his company's shares. This is more than Buffett has spent buying Berkshire's existing stakes in Apple, Bank of America, American Express, Coca-Cola, and Chevron, combined.
But the Oracle of Omaha's favorite stock is slumping. As of this writing on July 23, it's down more than 10% from its all-time closing high in early May. Perhaps more importantly, it's underperforming the benchmark S&P 500 on a year-to-date basis.
Image source: Getty Images.
Berkshire Hathaway's slump is a sign of Buffett's resolve and shouldn't be confused with weakness
With Berkshire's billionaire chief set to turn 95 in less than five weeks, as well as retiring from the CEO role at the end of this year, few investors would fault him for losing his touch. But what we're witnessing with Berkshire's stock at the moment isn't a sign of Buffett failing. Rather, it's validation of his resolve and investment philosophies.
During his six decades as CEO, Buffett has bent a few of his own unwritten investment rules. For instance, while he's often viewed as a long-term investor, he and his top advisors purchased shares of gaming giant Activision Blizzard in 2022 as a short-term arbitrage opportunity given Microsoft's $95-per-share all-cash offer to acquire the company.
But the one investment philosophy Warren Buffett hasn't wavered on in six decades is his desire to get a good deal. Value is of the utmost importance to Berkshire Hathaway's billionaire chief. No matter how much he appreciates a company's competitive edge, brand, and/or management team, he's not going to buy shares if the valuation doesn't make sense.
When Buffett green-lit the cumulative purchase of nearly $78 billion worth of his favorite stock over 24 quarters (six years), Berkshire Hathaway stock consistently traded at a 30% to 50% premium to its book value. But between July 1, 2024, and March 31, 2025, Buffett hasn't spent a dime to repurchase his company's stock. The reason? Berkshire's premium to book climbed to between 60% and 80%. Even shares of the Oracle of Omaha's own company are off-limits when the valuation no longer makes sense.
BRK.A Price to Book Value data by YCharts.
However, Buffett's cold-turkey approach with his own company's stock isn't unique. He's been a net-seller of equities for 10 consecutive quarters, with $174.4 billion more in stocks sold than purchased.
Back in 2001, in an interview with Fortune magazine, Buffett referred to the market-cap-to-GDP ratio as, "probably the best single measure of where valuations stand at any given moment." This valuation tool, which divides the cumulative value of all public companies by U.S. gross domestic product (GDP), has averaged a multiple of 85% when back-tested to 1970. This is to say that the aggregate value of all publicly traded stocks has equaled about 85% of U.S. GDP over 55 years.
As of the closing bell on July 22, the "Buffett Indicator," as this valuation measure is now more-commonly known, hit a record high of 212.23%! Value isn't just hard to come by in this market -- it's practically nonexistent.
What we're witnessing from Buffett isn't weakness. Rather, we're seeing a time-tested investor sticking to his roots and purposefully sitting on his hands until valuations make sense. Though there's no timeline as to when valuations will fall back into Warren Buffett's (or successor Greg Abel's) wheelhouse, patience has proved to be a virtue and substantial moneymaker in the past for Berkshire's CEO and the company's shareholders.
