Warren Buffett's portfolio at Berkshire Hathaway (BRK.A +0.01%)(BRK.B 0.24%) is getting a bit strange. The holding company still owns dozens of stock positions, but its cash position is soaring to record highs. Roughly one-third of Berkshire's entire market cap, more than $300 billion, is now tied up in cash. This is strange given Buffett has long warned investors against owning cash.
Even more concerning, Berkshire recently reported that it reduced two of its top holdings by a combined $15.5 billion. Of Berkshire's top three positions, two experienced net selling last quarter, while the other was merely maintained at previous levels.
Should investors start to panic? Here's what to understand about Berkshire's portfolio and Buffett's apparent nervousness about current stock market conditions.
NYSE: BRK.B
Key Data Points
Warren Buffett isn't intentionally trying to time the market
Warren Buffett has long cautioned investors against market timing. Even the best portfolio managers in the world have a difficult time keeping up with the returns generated through passive investing. Over time, U.S. stock markets tend to go up. So if you're taking your money in and out of the market constantly, you're decreasing the amount of time that your money is invested. And because the stock market tends to go up more than it goes down, less time invested stacks the odds against you.
For this reason, Buffett has avoided market timing. But that doesn't mean that his portfolio is always 100% invested. Last quarter, Berkshire Hathaway reported a record cash pile of $382 billion -- roughly one-third of Berkshire's entire market cap! This isn't a new phenomenon, either. Berkshire's cash position has been increasing for many quarters, hitting new records along the way.
Buffett's rising cash position isn't the only cause for concern. The company also announced zero share buybacks this quarter, even though it has repurchased tens of billions of dollars of its own stock in recent years. And Berkshire recently reported major selling in two of its top three positions: Apple and Bank of America.
Put this all together and it sure seems like Buffett is trying to time the market. Why else would you sell down some of your biggest holdings and then refuse to reinvest the cash in other stocks, or even your own shares, all resulting in a record cash balance? But there's another explanation investors should understand fully, especially if you have money in the market today.
Image source: The Motley Fool.
Wise investors should mimic Berkshire Hathaway's current strategy
What Warren Buffett is doing right now shouldn't be considered classic market timing. Instead, Buffett is likely just buying what he can at reasonable prices. And if there aren't enough deals to be had, then he won't go chasing them, choosing to keep his money in cash until more deals appear.
Putting it all together -- Buffett's recent stock sales combined with mounting cash, zero share buybacks, and the stock market trading near all-time highs -- Buffett's current approach makes sense. He's still buying shares when he can, as evidenced by his recent purchase of more Chubb Limited stock. But he clearly isn't finding deals left and right. And instead of forcing purchases, Buffett is choosing to largely remain on the sidelines. He's probably not happy with that reality, but that's the reality we live in.
Investors today are likely wise to follow in Buffett's footsteps. Don't time the market, but don't force investments, either. If you can find enough deals or have a long enough investment horizon -- long enough to compensate for a temporary downturn in 2026 -- keep putting your money to work. But if you're relatively bereft of bargain finds, or may need access to your money in the short term, it may make sense to hold more cash than you normally own. For his part, Buffett is currently holding roughly 30% of Berkshire's total market cap in cash.
