By admin 
One of the well-known investment pieces of advice is: ‘Be fearful when others are greedy and be greedy when others are fearful.’ It’s fitting that this advice comes from the world’s most famous investor, Warren Buffett, who first laid out a version of it in a 1968 letter to shareholders. His words are more relevant than ever stock market is reaching new heights and it seems like everyone is getting in on the action, except Buffett himself. Has the Oracle of Omaha gotten scared?
Even as company valuations rise, Buffett has never been on more dollar bills. His conglomerate, Berkshire Hathawaycurrently holds $325 billion in cash and equivalents, according to the company’s quarterly earnings reports financial statements. More than 288 billion dollars of that pile is in US government bonds, the textbook example of investing at the so-called ‘risk-free’ interest rate.
At the same time the Oracle has has been active on the market – in the form of a sales frenzy. During each of the last eight quarters, CNN reports that Berkshire sold more shares than it bought, and in particular sold two of the three largest stocks – Apple And Bank of America.
Apple represented $178 billion in Berkshire’s portfolio at the end of last year, about five times the size of the conglomerate’s second-largest position. While the iPhone maker, which has Buffett long praisedremains the primary holding company of Berkshire, the conglomerate cropped its stake by more than half. As of September 30, the company owns $69.9 billion worth of Apple stock.
Realizing gains on these investments boosted Berkshires’ quarterly net profit to $26.25 billion, or $18,272 per Class A share. As the chart below shows, the conglomerate’s shares have easily outperformed the broader market, more than doubling the S&P 500’s returns over the past three years.
Check out this interactive chart on Fortune.com
Will Buffett make a major acquisition?
Past enormous profit taking, but will the Oracle also leave the market because he thinks it is overheating? The famous ‘Buffett indicator’, which compares the value of all listed stocks to the size of the US economy, suggests this is possible.
Using the Wilshire 5000 Index as a proxy, The Wall Street Journal calculated that number is roughly 200%, suggesting the market is under more pressure than at the height of the tech bubble.
In the event of a market downturn, Berkshire would certainly have the resources to take advantage of the opportunities. The Magazine noted that Buffett’s company could give a check to all but about 25 of America’s most valuable publicly traded companies, including names like Walt Disney, Goldman Sachs, Pfizer, General Electricand AT&T.
While Buffett may be sitting out the stock rally due to inflated valuations, it’s also possible he’s just waiting. Like the Magazine At the 2023 annual meeting, he said: “What we would really like to do is buy great companies. If we could buy a company for $50 billion or $75 billion, $100 billion, we could do that.” There simply aren’t many companies of that size operating, so that could also explain why Berkshire hasn’t spent.
The Magazine noted that the company’s cash holdings are likely a reflection of how the current situation is holding the company back from making big moves. Berkshire would currently have to pay a premium of 20% or more for any type of acquisition. Meanwhile, the company’s sheer size has made it increasingly difficult for Berkshire to copy its proven model of using profits to consistently beat the market.
At last year’s annual meeting, Buffett also suggested he would keep more money on hand to prepare for higher prices capital gains tax. However, the tax hikes he said were imminent may not materialize anytime soon if Trump returns for a second term in the Oval Office.
This story originally ran Fortune.com