The legendary value investor Warren Buffett’s company Berkshire Hathaway will soon publish its 13F for the second quarter of 2023, which will list the stocks it bought and sold during that period. Buffett has been reducing his exposure to US stocks, including his own, according to Berkshire’s quarterly filings this year, which is a significant indication.
With dividends taken into account, Berkshire Hathaway shares have consistently underperformed the SPX in recent years, with a 20 percent underperformance in 2019 ranking as Buffett’s sixth-worst underperformance since he assumed control of the business in 1965.
Buffett, who is regarded as one of history’s best capital allocators, uses cash to either buy shares of publicly traded companies or to buy them outright. He has also studied share buybacks in recent years, and in this year’s annual letter, he defended them. But according to the company’s Q2 earnings, which were released earlier this month, not only was the “Oracle of Omaha” a net seller of stocks to the tune of almost $8 billion during the period, he was also quite thrifty with repurchasing Berkshire Hathaway shares, spending only $1.4 billion. As a result, Berkshire’s balance sheet’s total cash amount increased to $147.2 billion, which is the second-highest amount ever.
Berkshire reduced share repurchases in Q2 and was a net seller of stocks in both the first and second quarters of 2023, which suggests that the renowned investor is uneasy about the current valuations of publicly traded companies or his own Berkshire Hathaway stock.
The U.S. market cap-to-GDP ratio is about 170 percent, and according to FactSet’s August report, the forward 12-month price-to-earningsThe price-to-earnings ratio, often abbreviated as P/E ratio, is a fundamental metric used by investors and analysts to evaluate the relative value of a company's shares in the stoc... More multiple for the S&P 500 is 19.2x, which is higher than the 5-year average of 18.6x and the 10-year average of 17.4x. In addition, following several rate increases by the Federal Open Market Committee, interest rates, a major factor in stock valuations, are currently at their highest level since 2001. Since growth stocks have their majority of earnings skewed toward the future, higher interest rates are almost always bad for most stocks.
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