Key Takeaways
- Warren Buffett’s Berkshire Hathaway continues to be a net seller of stocks, having offloaded a quarter of its stake in Apple in recent months, regulatory filings revealed Thursday.
- The holding company added to its cash pile for a ninth consecutive quarter, bringing its cash on hand to a record level.
- The stock market’s total value has climbed to roughly double U.S. GDP, a ratio Buffett previously called “playing with fire.”
Warren Buffett is stockpiling cash. His Berkshire Hathaway (BRK.A; BRK.B) holding company continued to sell more than it bought in the third quarter, including a quarter of its stake in Apple (AAPL), regulatory filings revealed Thursday.
Berkshire Hathaway cut its large stake in Apple to about $70 billion at the end of September from nearly $175 billion at the start of the year. The most recent selloff was suggested by Berkshire’s third-quarter earnings report earlier this month, but had yet to be officially disclosed to the public. However, the iPhone maker still represents roughly a quarter of Berkshire’s $266 billion equity portfolio.
Besides Apple, Berkshire sold roughly 235 million shares of Bank of America (BAC). This was largely known, as Berkshire was obligated to report its sales of BofA stock throughout the quarter since it owned more than 10% of the lender.
Berkshire’s Cash Reaches Record Levels
The filings come after Berkshire Hathaway said earlier this month that its cash pile had swelled to a record $320.3 billion in the third quarter from $271.5 billion the prior quarter. Of that amount, $288 billion is invested in short-term Treasury bills. Berkshire has accumulated cash in each of the past nine quarters.
Investors watch Berkshire’s cash hoard closely for its potential as “dry powder.” One potential reason Buffett’s keeping that powder dry: The “Oracle of Omaha” may not see much room for growth in the market.
The ratio of stock market capitalization-to-GDP, also known as the “Buffett Indicator,” is used to determine whether an overall market is undervalued or overvalued. The stock market’s total value hit a record high of $58.13 trillion on Monday, “an unprecedented 198.1% of U.S. GDP last quarter,” Business Insider wrote, citing Wilshire Indexes data.
That number is a major red flag for Buffett. In a famous Fortune article from 2001, Buffett said, “If the ratio approaches 200%—as it did in 1999 and a part of 2000—you are playing with fire.”
Correction—November 15, 2024: The article has been updated to correctly state the size of the U.S. stock market relative to GDP.
