Warren Buffett’s Berkshire Hathaway has amassed a record $348 billion in cash. This was revealed during the company’s recent annual shareholder meeting. The meeting drew around 40,000 attendees, a big change from the mid-1970s when it was held in a subsidiary’s cafeteria with only a few shareholders present.
Berkshire Hathaway’s quarterly report showed the company’s significant liquidity. At the end of the March quarter, Berkshire had $347.7 billion in cash, cash equivalents, and U.S. Treasuries. While a large cash position is usually seen as a good thing, in Berkshire Hathaway’s case, it raises concerns.
Wall Street often looks to Warren Buffett and his top advisors as a gauge for the market’s attractiveness. The fact that Berkshire Hathaway has been a net seller of stocks for 10 straight quarters suggests Buffett sees fewer attractive buying opportunities in the current market. This long selling period has added a lot to the record cash accumulation.
One core idea of Buffett’s investment philosophy is value investing.
Berkshire’s record cash accumulation
He only buys stocks when he believes they are undervalued.
This disciplined approach means he won’t overpay, even for promising companies, if their current valuations don’t meet his criteria. As a result, Berkshire’s own stock, trading at a big premium to its book value, has been largely untouched in recent quarters, further increasing the company’s cash reserves. The historically high valuation of the broader market adds to this issue.
The S&P 500’s Shiller price-to-earnings (P/E) ratio hit a peak near 39 in December 2024. This was one of the highest levels in history, well above the long-term average of 17.24. High Shiller P/E ratios have previously signaled major downturns in the market.
While Buffett hasn’t directly mentioned the Shiller P/E ratio, his actions—prolonged selling and increasing cash reserves—suggest he finds current stock valuations unattractive. This cautious stance indicates Buffett is preparing for a potential market correction. Despite Buffett’s long-term optimism about the U.S. economy and stock market, his short-term actions hint at challenges ahead for investors.
The notable accumulation of cash by Berkshire Hathaway highlights Buffett’s commitment to value investing and his readiness to seize opportunities when valuations become more favorable.
