Investors can often benefit from following the recent moves and decisions made by the biggest names in the market, especially if they can work through reverse engineering some of the reasons behind these decisions. With that in mind, today’s analysis will not be about which bank or hedge fund bought which stock, but rather will be about a well-known investor who chooses to stay out of this bull market.
Berkshire Hathaway today
As of 10/01/2025 at 03:58 PM ET
- 52 week range
- $357.98
▼
$491.67
- P/E ratio
- 8.94
- Price target
- $457.50
Warren Buffett is known as the Oracle of Omaha and one of the most valuable and respected investors in the industry. Of the many indicators generated from his stock market activities, this indicator is perhaps one of the most direct, relating to the amount of cash held in his holding company, Berkshire Hathaway Company New York Stock Exchange: B.C.
Typically, Berkshire’s cash balances fluctuate with the business cycle. This means that the company will hold a greater proportion of cash on its balance sheet when there are no attractive purchasing opportunities in the market, and very little cash when there are an abundance of potential deals in the market, as the company will allocate that cash to these purchases.
Reason 1: Buffett expects a flat market
Studying Buffett’s past behavior can help investors understand the nature of his decisions today, and this is where a 1999 interview with CNN Business comes in handy. In this interview, Buffett said he had been putting off investing in the market due to outrageous valuations.
While many criticized Buffett for missing the dot-com bubble, Berkshire shareholders thanked him a few years later when he used all that liquid cash on amazing trades created in the sell-off that followed. However, the CNN interview doesn’t look much different from what the markets find today.
According to the Buffett index, which is calculated by dividing the value of the stock market by the gross domestic product of the United States,… SPDR S&P 500 ETF NYSEARCA: SPY At its most expensive levels in history. However, Buffett’s logic does not end there.
He also stated that since corporate profits amount to 6% of GDP, earnings per share cannot grow fast enough to exceed core inflation levels and not cause a further bubble in the market. For this reason, it went to cash and remained cash until 2004.
Today, Berkshire has just over $325 billion in cash, its highest level since then. However, the total cash value is not the most important metric here; What matters is what percentage of net assets this dollar value represents. As of January 2025, this $325 billion represents up to 25% of Berkshire’s assets, which is unusual compared to the average range of 14% to 16%.
Since corporate profits today account for more than 12% of the country’s GDP, Buffett has additional reason to expect a flat market as he did at the time, which justifies his cash position rising to unprecedented levels.
Reason 2: There is nothing to buy but bonds
Aside from cash holdings, Buffett now holds more capital in bonds than the Federal Reserve itself. Buffett is known to do this when he believes there will be a long period of time without significant stock buying activity.
He is not alone in this opinion, either Latest macro forecasts for 2025 A report from Goldman Sachs indicates that there is some downside risk in the S&P, and they also recommend buying bonds and oil as hedges. This is the place iShares 20+ Year Treasure Bond ETF Nasdaq: TLT Energy stocks will play a role for investors.
Also why Buffett now has so much capital in both bonds and a certain name in the oil business. Over the past few quarters, Buffett has accumulated a 29% stake in… Occidental Petroleum Company New York Stock Exchange: Oxyso more and more of the market is discovering the best opportunities for 2025.
Even with Buffett’s cash balance, stock market valuations, and more factors acting as a warning, investors shouldn’t completely exit the market as is. They should remember that Buffett has a very large pile of capital to work with, so restrictions and mandates abound.
However, other stocks could turn 2025 into a breakout year. These are things that Buffett may not be able to buy because of their sizeBut investors can benefit from it today.
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Are you looking to avoid the hassles of slander, volatility and uncertainty? You would have to be out of the market, which is not viable. So, where should investors put their money? Find out about this in this report.
