Warren Buffett Has Been Stockpiling Cash. It May Not Be the Dire Warning People Think.

The market has been buzzing about Warren Buffett's huge cash stockpile that's reached record levels. The legendary investor has been a net seller of equities for the past nine quarters, and Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) ended 2024 with $334 billion in cash and equivalents.

That certainly sounds like a warning signal to the market, but in his annual shareholder letter released last week, Buffett gave an explanation for this stockpile that may not be what you think.

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

It's not about the market

Berkshire Hathaway has been building up its cash position for more than two years now, and as it's been growing, the message to the market seems to be looking clearer. It sold $143 billion in stock in 2024, while buying only $9 billion. That's a net sale of $134 billion for the year.

To understand what's happening at Berkshire Hathaway, you need to appreciate what Berkshire is and what it's not. It is a holding company with ownership in 189 operating businesses, with many owned outright, and it has a position in about 45 equities.

Buffett said that 53% of Berkshire Hathaway's businesses reported declining earnings in 2024, but the holding company benefited from a predictable increase in investment income from improving Treasury bill yields, and that it "substantially" expanded its position in them. In fact, the vast majority of the cash position in 2024 was in Treasury bills, and these hedged against the declining earnings of Berkshire Hathaway's business.

Buffett often talks about his responsibility to shareholders. This year, he said, "Our goal is to communicate with you in a manner that we would wish you to use if our positions were reversed -- that is, if you were Berkshire's CEO while I and my family were passive investors, trusting you with our savings."

People entrust him with their money, and like any money manager, it's his job to maximize shareholder value. His job is not to speculate in equities or focus exclusively on the equity portfolio. It's just one part of a massive whole, and part of that responsibility is to increase the company's earnings.

In other words, what Buffett does for Berkshire Hathaway might be very different than what individual investors do with their money. That's why, as much as an investor can gain by tracking Buffett's moves and hearing his gems, you should take it all with a grain of salt.

The market is still expensive

That also doesn't negate the fact that the market is certainly expensive right now, and Buffett doesn't buy stocks that don't fit his investing criteria, one of which is being a solid value. He may not be holding onto cash waiting for a market crash, but he's broadcasting that there aren't too many great deals to be found, so he's not buying.

Buffett reiterated in the letter what he's said many times in the past: "Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities." He didn't say where he thought the market was today, but readers can figure that out based on his investing activity.

So while Buffett's sales may not indicate that he thinks the market is going to crash, it does look like he doesn't see many stocks worth buying at today's prices. No one knows when there's going to be some kind of correction, but it will happen at some point, because that's how the market works. Investors can prepare by having some cash ready to pounce when it does.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $736,343!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of February 28, 2025

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.