Berkshire Just Hit $1 Trillion, But Warren Buffett’s Signaling It’s Time To Take Profits | The Motley Fool

We knew it was coming. We didn’t know when. Warren Buffett’s Battle Berkshire Hathaway (BRK.A 0.70%) (BRK.B 0.89%) The conglomerate recently achieved a market capitalization of $ 1 trillion for the first time, combining the extraordinary spirit held only by Microsoft, Nvidia, apple, Alphabet, Amazonand Meta Platforms. In fact, Berkshire Hathaway is the only non-tech company on the exclusive list.

Most investors are probably familiar with the Buffett legend as Berkshire has delivered an annual return of 19.8% for nearly 60 years, S&P 500 index in the process. $1,000 invested in Berkshire when Buffett took over would be worth more than $40 million today.

But is Berkshire stock a bargain right now? The company retains many of the characteristics that made it so successful, including a diverse collection of wholly owned, top-tier businesses such as BNSF railroad and GEICO insurance, as well as warehouse run by Buffett himself, a very popular investor. in history.

However, there is one sign that it may not be a good time to buy Berkshire stock, and it comes from a strange place: Buffett himself. Read on to see why.

Buffett is pumping the brakes on his favorite stock

Investors tend to focus on the stocks that Berkshire has in its portfolio, but there is no stock that Berkshire buys more frequently than its own. The company changed its stock buyback strategy in 2018 from buying its stock only when it was less than 1.2 times to allow for “undervalued” buybacks. of Berkshire, which is carefully determined.”

Since then, Berkshire’s stock price has increased as the company bought back about $75 billion in stock, or more than 200,000 of its outstanding Class A shares.

However, as the stock has soared this year, up 29.4% year-to-date, Berkshire Hathaway has continued to buy shares. As you can see from the chart, Berkshire’s stock fell to its lowest level in more than five years in the second quarter.

BRK.A data by YCharts

At the same time as the stock price has fallen, Berkshire’s cash flow has increased, reaching $277 billion at the end of June after the company dumped most of its stake in Apple, the largest the most.

Instead of reinvesting that money in the stock market or using it to buy Berkshire stock, Buffett just left it in Treasury bills on the balance sheet. Buffett himself bemoans the high valuations of the stock market, and by holding $235 billion in T-bills while reducing the stock price, he seems to be saying that to get a profit of 5% from the assets is a better return than he would get if he bought again. his property now.

According to Buffett’s valuation metric, price-to-book value, Berkshire also looks more expensive than it has been in a long time. As you can see, its price-to-book value is now approaching 1.7, ahead of the 1.2 that used to be the repurchase threshold.

BRK.A data by YCharts

Is it time to sell Berkshire Hathaway stock?

Berkshire Hathaway is a difficult company to value. It owns many businesses in industries ranging from insurance to manufacturing to services to restaurants, and has a large stock portfolio.

Berkshire’s businesses generated $25.8 billion in operating income in the first half of the year, and Berkshire earned $25.7 billion in investment gains, making its $ 1 trillion looks reasonable.

However, Berkshire is a slow-growing company this season, with revenue up 3% over the first half of the year to $183.5 billion. Those numbers show that investors shouldn’t expect growth in the stock despite its big price gains this year.

Berkshire’s recent performance and current valuation aren’t reasons to sell the stock, but after shares are up nearly 30% this year, prospective buyers may want to take a cue from to Buffett and wait for a good price before buying.

Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of CEO of Meta Platforms Mark Zuckerberg, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a publicity strategy.