For 60 years, Berkshire Hathaway (BRK.A +0.16%)(BRK.B +0.14%) CEO Warren Buffett has been dazzling Wall Street and investors with his ability to spot amazing deals hiding in plain sight. Since taking the reins, he's overseen a nearly 6,000,000% cumulative gain in his company's Class A shares (BRK.A).
But this glorious investment career is in its twilight. During Berkshire's annual shareholder meeting in early May, Buffett announced his intent to retire from the CEO role at the end of this year and hand the baton over to predetermined successor Greg Abel. Abel has vowed to maintain the same ethos that Buffett and late right-hand-man Charlie Munger promoted, which includes a long-term vision and an unwavering focus on value.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
However, the Oracle of Omaha isn't going quietly into retirement (as CEO). Though he's an unabashed optimist who would never bet against America, his actions over the last three years speak louder than his words and give life to his $177 billion warning to Wall Street.
The Oracle of Omaha has been a big-time seller of stocks
Historically, Berkshire Hathaway's success has derived from Warren Buffett's willingness to make acquisitions and purchase stakes in amazing businesses. This is why investors wait on the edge of their seats for the quarterly release of Berkshire's Form 13F, which divulges precisely which stocks its billionaire boss has been buying and selling.
Despite being a long-term optimist, Buffett has been a decisive net seller of stocks for 11 consecutive quarters:
- Q4 2022: $14.64 billion in net stock 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
- Q1 2025: $1.494 billion
- Q2 2025: $3.006 billion
On an aggregate basis, Berkshire's billionaire boss has sold $177.4 billion more in stock than he's purchased from Oct. 1, 2022 through June 30, 2025.
NYSE: BRK.B
Key Data Points
It's worth noting that Buffett has also gone cold turkey on his favorite stock to buy. From mid-July 2018 through the midpoint of 2024, Buffett used nearly $78 billion to repurchase shares of Berkshire Hathaway stock. But following this 24-consective-quarter stretch of buying back shares, Buffett has now gone 13 straight months (June 1, 2024 – June 30, 2025) without spending a dime on repurchases.
There's only one explanation for Warren Buffett's silent but pertinent warning: stock valuations are worrisome.
The stock market is historically pricey, and Buffett knows it
Valuing stocks or the broader market can be tricky, because there's no one-size-fits-all blueprint or line in the sand when it comes to what's cheap and what's overpriced. The variations of opinion we see from investors, with regard to valuation, is what makes the stock market a market!
But certain valuation markers leave little room for interpretation.
For example, the S&P 500's (^GSPC +0.84%) Shiller price-to-earnings (P/E) Ratio is pushing to rarified territory. You'll occasionally find the Shiller P/E referred to as the cyclically adjusted P/E Ratio, or CAPE Ratio.
Whereas the traditional P/E ratio takes into account trailing-12-month earnings, which makes it susceptible to being tripped up by recessions, the Shiller P/E is based on average inflation-adjusted earnings over the last 10 years. It's an ideal valuation measure when looking back multiple decades or more than a century.
S&P 500 Shiller CAPE Ratio data by YCharts.
As of the closing bell on Sept. 19, the Shiller P/E clocked in at 39.95, which not only marks the highest multiple during the current bull market, but the third-priciest reading during any continuous bull market dating back 154 years. One more reasonable up day for the benchmark S&P 500 would more than likely make this the second-priciest market in history.
The only two times the S&P 500's Shiller P/E has maintained a higher reading was during the first week of January 2022, where it topped 40 by a few hundredths, and when it peaked at a multiple of 44.19 in December 1999.
The prior top in January 2022 was followed by a 25% peak-to-trough drop for the S&P 500, and an even steeper decline for the growth-focused Nasdaq Composite (^IXIC +1.71%). Meanwhile, the round-trip from top to bottom with the dot-com bubble from 2000 through 2002 was 49% for the S&P 500 and a whopping 78% for the Nasdaq Composite.
While former steep declines in Wall Street's major stock indexes don't guarantee what's to come, prior occurrences of the S&P 500's Shiller P/E nearing/topping 40 were eventually met with significant downside.
Warren Buffett being a net seller of $177 billion in stock is his way of warning investors that he expects meaningful downside in equities.
Image source: Getty Images.
Warren Buffett's legacy will be a historically large treasure chest for Greg Abel to deploy
One thing the Shiller P/E is not is a timing tool. Although it's had a knack for foreshadowing eventual trouble for Wall Street's major stock indexes, it's not helpful in deciphering when inflection points will be reached. As previously pricey market's have shown, a popular trend or game-changing innovation can fan the flames of investor exuberance for years, as occurred prior to the dot-com bubble bursting.
But at some point in the presumed not-too-distant future, a stock market correction (potentially a sizable one) will rear its head and send the S&P 500 and Nasdaq Composite notably lower. When this happens, Buffett's journey as Berkshire Hathaway's CEO will be complete, as he'll have left his successor, Greg Abel, with a near-record amount of capital to deploy -- $344.1 billion, including U.S. Treasuries, as of June 30.
The Oracle of Omaha has made a living being exceptionally patient and pouncing on price dislocations when they arise.
NYSE: BAC
Key Data Points
One of his most-famous (and profitable) investment dealings is infusing Bank of America (BAC 2.73%) with $5 billion in cash shortly after the financial crisis. In exchange for shoring up BofA's balance sheet, Berkshire Hathaway received $5 billion in Bank of America preferred stock yielding 6% annually.
While collecting a $300 million annual dividend was fun, the real payoff was the 700 million common stock warrants of BofA Berkshire received in August 2011 and exercised in mid-2017 at just $7.14 per share. It provided an instant $12 billion windfall for Berkshire Hathaway, which has since grown.
It's tough to tell what the next "Bank of America" moment is going to be for Berkshire Hathaway in a post-Buffett era. What can be said is that if Abel and his top advisors stick to this disciplined strategy that made Berkshire a phenomenal investment for decades, it'll be set up to outperform once the next market downturns arrives.
