For over six decades, Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), has captivated investors with his unmatched ability to outperform the S&P 500. As of December 26, 2024, Berkshire Hathaway’s Class A shares have delivered a cumulative gain of over 5,515,517%, compared to around 40,000% for the S&P 500, including dividends. Yet, Buffett’s recent actions—cashing out $166 billion in net stock sales over the past two years—are raising eyebrows.

Buffett’s Sell-Off: Eight Straight Quarters of Net Sales

Buffett’s persistent selling streak began in late 2022 and has continued through September 2024. Quarterly net sales include:

  • Q4 2022: $14.64 billion
  • Q1 2023: $10.41 billion
  • Q2 2023: $7.98 billion
  • Q3 2023: $5.25 billion
  • Q4 2023: $0.53 billion
  • Q1 2024: $17.28 billion
  • Q2 2024: $75.54 billion
  • Q3 2024: $34.59 billion

This trend has swelled Berkshire’s cash reserves, including U.S. Treasuries, to over $325 billion. It’s a stark contrast to Buffett’s usual optimism, as the Oracle of Omaha famously advises investors to “be greedy when others are fearful.”

Why Buffett Is Selling: Pricey Stocks and Strategic Gains

Buffett has cited tax efficiency as one reason for his sales. With corporate tax rates at historic lows, Berkshire’s realized gains from holdings like Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC) could minimize long-term tax burdens.

However, a bigger factor appears to be valuations. Stocks are historically expensive, as highlighted by the Buffett Indicator—a measure dividing the total market cap of all publicly traded companies by U.S. GDP. The indicator recently surpassed 209%, its highest level ever, well above its historical average of 85%. Peaks in this indicator have often preceded major market downturns, including the dot-com bubble, the 2008 financial crisis, and the 2022 bear market.

Why Long-Term Optimism Still Reigns

Despite his caution, Buffett’s long-term faith in America’s resilience remains unshaken. His storied investment in Bank of America during the 2008 financial crisis exemplifies this optimism. By providing a $5 billion lifeline to the bank, Buffett secured preferred shares with a 6% annual dividend and warrants to buy 700 million shares at $7.14 each. When these warrants were exercised in 2017, the deal became one of Berkshire’s most profitable ventures.

As Buffett wrote during the 2008 crisis: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.” While he’s waiting for the next gold rush, Berkshire’s growing cash hoard signals that Buffett is preparing to seize future market dislocations.

Takeaway for Investors

Buffett’s moves may serve as a warning that stocks are overvalued, but they also remind us of his unwavering belief in long-term value investing. Though his short-term caution is palpable, history suggests he’ll be ready to deploy capital when the time is right. For investors, the lesson remains clear: Stay patient, and always be ready to act when opportunity arises.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

This story was originally featured on Yahoo.Finance.