Warren Buffett's Berkshire Hathaway (BRK.A -0.39%) (BRK.B -0.56%) continues to offload millions of shares from a few key holdings. The company now sits on the largest reserve of cash and equivalents in company history, a war chest of more than $325 billion.
Buffett and company are selling across the board, with a few notable exceptions like Sirius XM. A year ago, Apple comprised about half of the company's portfolio. While Berkshire still owns close to $70 billion worth of Apple shares, it's sold roughly 67% of its stake in the last year. The company also shed about $10 billion in Bank of America stock since this summer. Overall, this last quarter saw Berkshire sell $36.1 billion in stock while buying only $1.5 billion.
Why? Does the Oracle of Omaha have something up his sleeve? As the broader market hits new heights, is he seeing something others aren't?
Buffett may have concerns about the big picture
Although any speculation should be taken with a grain of salt -- there is no way to know just what he's thinking -- I think it's fair to say that Buffett has some reservations about the health of the market. Geopolitical risks abound, the stock market is reaching record highs, and technology is advancing at a pace that could be destabilizing in ways that are hard to predict.
In last year's letter to shareholders, Buffett described the market as particularly "casino-like" and expressed his determination to put Berkshire in a position not just to survive a possible "conflagration," but to "help extinguish the financial fire." This attitude worked in the wake of the 2007-2009 financial crisis, helping Bank of America to recover and making an incredible return for Berkshire in the process.
Buffett isn't alone in his concern. Recently, JPMorgan Chase Chief Executive Officer Jamie Dimon spoke of a "treacherous" geopolitical landscape and stated that "cash is a very valuable asset sometimes in a turbulent world." A recent analysis from Goldman Sachs expects equities to return just 3% during the next decade.
It seems that Buffett has concerns about his own company's market valuation as well. This quarter was the first time since 2018 that he did not repurchase shares of Berkshire, his preferred method of rewarding shareholders because the company doesn't pay a dividend. The company policy says that Buffett can only buy back shares if he believes "that the repurchase price is below Berkshire's intrinsic value, conservatively determined."
This doesn't necessarily mean Buffett thinks his company's shares are overpriced, though it's possible. It could simply mean that he believes his cash is best spent elsewhere.
There are other possibilities
I want to reiterate that we don't really know what Buffett is thinking. He's been fairly tight-lipped about the selling thus far. It's entirely possible that he is repositioning Berkshire. Perhaps he sees an opportunity elsewhere in the market. He has already delivered impressive returns on these investments, after all. And there are tax implications; Buffett has indicated he believes the capital gains tax could rise soon. If that's the case, it makes sense to lock in a chunk of your profit now.
It's also important to note that as the company and its investments grow, it becomes increasingly harder to deploy cash judiciously. There are, after all, only so many opportunities at any given time. Buffett's philosophy is one of patience -- he would prefer to miss out on an opportunity rather than recklessly invest just because he has money burning a hole in his pocket.
Ultimately, I think it's likely a combination of all these reasons. I think Buffett has legitimate concerns about the market. I don't think, however, that he believes the sky is falling. I think he is positioning his firm to take advantage of opportunities that present themselves in the near future, unsatisfied with what's currently on offer.
