Warren Buffett sells $134 billion in stocks and grows cash reserves, but offers no clear reason in his annual letter
Soror Shaiza | Feb 22, 2025, 22:36 IST
( Image credit : AP )
Warren Buffett's Berkshire Hathaway has been on a stock-selling spree, offloading $134 billion worth in 2024, all while expanding its cash reserves to a record $334 billion. But in his annual letter, the Oracle of Omaha failed to shed light on his increasingly cautious stance, leaving shareholders and analysts questioning whether a market downturn is looming or if he's preparing for the next generation to take over. Despite selling, Buffett reiterated his love for equities, leaving the mystery unresolved.
Berkshire’s Record Cash Hoard and Stock Sell-Offs: A Defensive Strategy?
In 2024, Berkshire Hathaway made headlines by selling over $134 billion worth of stocks, mostly trimming its holdings in Apple and Bank of America. Meanwhile, its cash reserves grew to a jaw-dropping $334 billion, prompting questions from investors about Buffett’s defensive approach. His reputation as a savvy investor with a knack for making shrewd stock purchases seemed at odds with this more conservative posture. Despite these actions, Buffett reassured shareholders that his preference for equities over cash remains unchanged, promising that Berkshire would continue to deploy most of its capital into stocks—specifically American ones with international operations.
The Confusing Absence of Buybacks: A Silent Signal?
Buffett’s approach to stock buybacks also raised eyebrows. While Berkshire’s operating earnings surged, the company did not repurchase any shares in the fourth quarter of 2024 or through February 2025. This marks a continuation of the buyback hiatus, despite the company’s strong financial performance. The pause in repurchasing Berkshire stock could hint at a more cautious outlook on valuations, but Buffett provided no direct explanation for this move. With the S&P 500 having risen sharply in recent years, investors wonder whether Buffett is simply waiting for better opportunities or if he's anticipating a more turbulent market ahead.
Buffett’s Cryptic View on Stock Valuations and Opportunities
In his annual letter, Buffett dropped a cryptic hint about the current state of stock valuations. He acknowledged that sometimes "nothing looks compelling" and that it’s "very infrequent" for Berkshire to find itself "knee-deep in opportunities." This suggests that while the market has been booming, Buffett may be finding fewer attractive investments at current prices. This cautious outlook has caused some to speculate that Buffett might be waiting for a market pullback or other external factors to create more favorable conditions for buying.
Preparing for the Next Generation: Is Greg Abel Ready to Step In?
Buffett’s annual letter also provided a hint about his plans for Berkshire’s future. While he’s still at the helm, Buffett has signaled that his successor, Greg Abel, will have the final say on investment decisions, including those concerning Berkshire’s public stock portfolio. Buffett has often praised Abel’s investment acumen, even comparing him to the late Charlie Munger. Some analysts believe that Buffett’s recent conservative moves may be less about market timing and more about preparing the company for Abel's leadership by simplifying its portfolio and hoarding cash for future deployment.