The recent uproar on Wall Street has begun to create dislocations in prices.
The past 60 years Berkshire Hathaway (brk.a -0.57%)) (brk.B) -1.19%)) CEO Warren Buffett has become a habit of running around Wall Street using old-school research tactics and relies on time to become his biggest ally. Since taking the reins in the mid-1960s, he has overseen an astounding cumulative return of 5,962,825% in the company’s Class A stock (BRK.A) as of the closing bell on April 8th.
Omaha’s oversized return oracle won him quite a bit. Both professional and everyday investors are eagerly eagerly waiting for Berkshire’s quarterly quarter Form 13F filing.
Warren Buffett, CEO Berkshire Hathaway. Image source: The Motley Fool.
While Warren Buffett is an unwavering value investor and optimist, the long-term investment approach he has been preaching for decades does not always align with his actions for a short period of time.
Warren Buffett’s $173 billion warning to Wall Street proved visionary
As of April 8th, Berkshire Hathaway chief was overseeing a $24.5 billion investment portfolio of 44 stock. More importantly, Buffett’s company closed in 2024, with a record high of $334.2 billion in cash, cash equivalents and the US Treasury Department on its balance sheet.
Record cash balances may be seen as positive news for most public companies, but they have been a somewhat unsettling development over the past two years for investors who have closely monitored Berkshire Hathaway and hoped Buffett will become an aggressive buyer of the stock.
For nine quarters (October 2022 to December 2024), Warren Buffett was a net seller of stock. This means he oversees the sale of more shares than he has been purchased. Here is the breakdown of the nine quarters:
- Q4 2022: $14.644 billion in net profit sales
- Q1 2023: 10.4 billion dollars
- Q2 2023: $798.1 billion
- Q3 2023: $5.2353 billion
- Q4 2023: $525 million
- Q1 2024: 1.728.1 billion dollars
- Q2 2024: $7.553.6 billion
- Q3 2024: 3459.2 billion dollars
- Q4 2024: $671.3 billion
Collectively, Buffett sells nearly $173 billion in stock than he bought in 27 months. He never comes out and says directly that he believes the stock market is expensive, but his actions clearly show that his value-first investment approach is struggling to find bargains.
This $173 billion warning to Wall Street is supported by the “buffet indicator” (i.e. the ratio of market cap to US-GDP). S&P 500The ratio of Schiller’s price (P/E) peaked at close to 39 in December. These measurements are more than twice the 55-year average of 85% for the Buffett indicator, and a 154-year average multiple of 17.23 for the Schiller P/E.
Buffett’s investment measures pointed to a downdraft in the stock market.
Image source: Getty Images.
The time to become greedy when others are afraid is fast approaching
While most investors are not fans of stock market fixes, bear markets, or crashes, the horrors that arise from these events are exactly encouraging Warren Buffett to make parts of the Berkshire Hathaway capital work.
Four trading sessions (April 3 to April 8) Dow Jones Industrial AverageS&P 500, and Nasdaq Composite They lost 10.9%, 12.1%, and 13.3%, respectively. These are the declines driven by uncertainty about President Donald Trump’s tariff policy and the general fear of what should come for the US economy. But it is also a recipe for price dislocation. This is exactly what Buffett is looking for, with a focus on value.
For example, Warren Buffett is buying stocks in the integrated oil and gas giant. Occident Oil (Oxy -9.35%)) Since its launch in 2022, there has been some degree of regularity. He oversees the purchase of approximately 265 million common stock in Occidental Stock.
The recent uproar on Wall Street has brought the spot prices for crude oil caregiving to their lowest in four years. Occidental could be hit harder by this move, where oil prices are lower than its peers, as it generates a disproportionate percentage of revenue from its drilling segment compared to other integrated energy companies.
However, this weakness may be temporary. Coupled with Russian invasions complicating the European energy needs of Russia’s Ukraine, long-standing capital investments from energy majors during the Covid-19 pandemic have strengthened the global oil supply. Occidental’s forward P/E ratio has dropped to just 9 due to warnings that the “e” in revenue is somewhat liquid at the moment. This could be just a kind of terrifying event that allows Buffett to become greedy.
The same can be said about the rise in stocks in Berkshire’s fast food restaurant chain. Domino’s pizza (DPZ) -0.52%)). Buffett’s company built 2,382,000 shares in late 2024, equivalent to $1 billion north of Domino’s.
Domino’s pizza stock has been far better than the Occidental Petroleum in recent weeks, but it still moves low. Inflation concerns could slow Domino’s growth in the very near future, along with uncertainty about how American brands will be perceived in overseas markets, given President Trump’s drastic tariffs.
However, this retrace of Domino’s stock reduced the forward P/E ratio to 22. This is the lowest forward P/E ratio in at least six months, with a 21% discount on average positive revenue over the past five years.
When the stock market crashes, the time for greed is rapidly approaching when others are afraid. While the broader market remains historically expensive, select stocks show price dislocations that are attractive for long-term investors like Omaha’s Oracle. It doesn’t seem too far from time to go shopping, and Buffett put some of Berkshire’s $334 billion treasure chests in work.
