Warren Buffett Keeps Selling Stocks, Builds Record $381 Billion Cash Stash. Is a Market Crash Imminent?

<!– Legacy Bulma: `live-update-content` opening

Legendary investor Warren Buffett has been steadily unloading stocks at Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) while amassing a massive cash reserve, sparking questions about a potential market crash. If the Oracle of Omaha is selling and stashing cash, should we be buying?

In the third quarter, Berkshire’s cash holdings ballooned to a record $381.7 billion, even as U.S. markets hit new highs. This cautious stance comes as Buffett, now 95, prepares to step down as CEO at year’s end, handing the reins to Greg Abel. But does this really signal an impending market crash? Analysts are divided, viewing it as a mix of prudence and missed opportunities in a rallying economy.

Berkshire’s latest earnings report underscores Buffett’s conservative approach. For the 12th consecutive quarter, the conglomerate was a net seller of equities in its $312 billion portfolio, which still includes major stakes in Apple (NASDAQ:AAPL) and American Express (NYSE:AXP). Buffett also didn’t buy back any Berkshire stock for the fifth straight quarter, despite Berkshire’s shares underperforming the broader market. 

The S&P 500 has surged ahead this year, leaving Berkshire’s stock down 2% since Buffett announced his CEO exit in May and trailing the index by 12 percentage points for the full year.

Still, why the hoarding? Buffett has long preached buying undervalued assets, but current valuations seem to appear too rich for his taste. The Oracle is not known for chasing valuations higher.

 “If you feel like stocks are expensive, including your own shares, you’re eventually going to be right, but you can be wrong for a long time,” said James Shanahan, an analyst at Edward Jones who recently upgraded Berkshire to a “buy” rating. This echoes Buffett’s history of sitting on cash during frothy markets, only to deploy it during downturns — like the 2008 financial crisis when he snapped up bargains.

Profit Surge Masks Underlying Slowdown

Despite the caution, Berkshire posted solid results. Third-quarter operating profit climbed 34% to $13.49 billion, or about $9,376 per Class A share, beating Wall Street’s expectations. Net income rose 17% to $30.8 billion, fueled by lower insurance losses and the absence of major catastrophes. Currency fluctuations contributed over two-fifths of the operating gain, while Geico saw policy growth but higher acquisition costs.

However, revenue growth lagged at just 2%, below U.S. GDP expansion. Subsidiaries faced headwinds: Clayton Homes struggled with waning consumer confidence, and units like Duracell, Fruit of the Loom, and Jazwares saw sales dips. BNSF railroad profit rose 6% on lower fuel costs and better productivity, but Berkshire Hathaway Energy dipped 9% due to wildfire legal bills and higher pipeline expenses. Falling interest rates are expected to crimp future earnings from cash holdings, adding pressure.

Cathy Seifert, a CFRA Research analyst with a “hold” rating, told Reuters Berkshire’s role as a U.S. economy proxy isn’t shining. “Berkshire isn’t even keeping up,” she said, highlighting the lack of catalysts for investors.

Abel’s Turn: Dividend or Deals Ahead?

Buffett’s exit marks a pivotal shift. Abel, a more operational leader, inherits a $1.03 trillion empire spanning insurance, railroads, energy, and consumer brands like Dairy Queen and See’s Candies. Options for the cash include Berkshire’s first dividend since 1967 or acquisitions — its last big one was Precision Castparts in 2016 for $32.1 billion. A recent $9.7 billion deal for Occidental Petroleum‘s (NYSE:OXY) OxyChem unit uses some cash, but much remains untapped.

Analysts speculate Abel might invest in operations to boost performance. Tom Russo, a longtime Berkshire investor, defended the strategy: “Berkshire isn’t going to deploy capital that won’t increase intrinsic value.” Yet, with markets rallying, the cash pile raises eyebrows about overvaluation risks.

Crash Warning or Smart Patience?

Buffett’s moves don’t necessarily signal imminent doom but reflect his value discipline, though timing is tricky. Past cash builds did precede corrections, such as in 2000 and 2007. Economic uncertainty, Trump’s One Big Beautiful Bill Act impacting renewables, the government shutdown, and consumer slowdowns add some context.

While Berkshire’s diversified businesses position it for resilience in the event a crash hits —  Buffett’s stash could fund plenty of bargain buys —  the transition to Abel’s stewardship remains the biggest question mark. His lack of proven stock-picking success introduces risk suggesting investors should take a wait-and-see approach before buying in.

The image featured for this article is © 24/7 Wall St.