Warren Buffett Just Gave Investors 3 Big Warnings About the Stock Market

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) just gave investors quite a bit of insight into its business. The conglomerate released its year-end 2024 earnings report, CEO Warren Buffett's annual letter to shareholders, and reported its fourth quarter stock portfolio activity.

In short, it seems Buffett and his team are taking a very cautious approach to investing right now. While Buffett clarified in his annual letter that Berkshire will always have the majority of its capital invested in equities, there are three important pieces of information to notice.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

Berkshire is selling more than it's buying

Warren Buffett and Berkshire's investing team have been net sellers of stocks for some time now, which is to say they're selling more than they buy. This has been especially true in 2024, as Berkshire unloaded a significant portion of Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC), which were its two largest stock positions at the beginning of last year.

In the fourth quarter, this pattern continued. To be sure, Berkshire is still finding some opportunities to deploy capital, opening a new position in Constellation Brands (NYSE: STZ) and adding to a few existing positions. But Berkshire unloaded shares of 12 different stocks, including another large portion of its Bank of America investment, and roughly three-fourths of its Citigroup (NYSE: C) shares.

Based on Berkshire's portfolio moves, it clearly looks like Buffett is growing more cautious on the banking industry, and that he and his team are still having difficulty finding attractive opportunities to invest in.

Buffett still isn't buying his favorite stock

Over the past few years, there is no stock Berkshire Hathaway has deployed more capital into than its own. Since the buyback plan was modified in 2018 to allow Buffett to buy back stock whenever he perceived a discount to intrinsic value, Berkshire has spent nearly $78 billion on buybacks.

However, in the fourth quarter of 2024, Berkshire didn't buy back any shares at all. This is the second consecutive quarter where the buyback has been paused. With Berkshire trading at or within a few percentage points of its all-time high for most of the fourth quarter, this isn't as much of a surprise as the third-quarter pause. But it certainly appears that Buffett doesn't see a compelling valuation in Berkshire's stock right now.

Berkshire's cash is at an all-time high (again)

Berkshire was holding $334.2 billion in cash, equivalents, and short-term investments at the end of 2024, which is a $9 billion increase compared with the end of the third quarter. Most of this is invested in short-term Treasury securities, from which Berkshire is receiving more than $10 billion in annual interest income.

To put this in perspective, Berkshire's cash is greater than the market caps of massive businesses such as Bank of America, Chevron (NYSE: CVX), and Coca-Cola (NYSE: KO).

In his annual letter, Buffett acknowledged that many people believe Berkshire has an "extraordinary cash position," but aside from assuring shareholders that the company still prefers investing in equities to holding cash, he didn't offer any explanation of why Berkshire has accumulated so much cash over the past year.

Buffett's letter offered little clarification

All of these moves point toward Berkshire taking a cautious approach to investing, although it's important to mention that in his letter, Buffett didn't specifically say that he thought stocks were overvalued. However, he did say that when investing, "often, nothing looks compelling."

However, Berkshire will hold its annual meeting of shareholders in May, complete with several hours of Q&A with Buffett and Berkshire's other top leaders. It's extremely likely that he'll be asked about his current thoughts on the market, especially considering Berkshire's recent cautious behavior, so we might get some more insight then.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $348,579!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,554!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $540,990!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of February 24, 2025

Citigroup is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Matt Frankel has positions in Bank of America and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.