Warren Buffett’s Berkshire Hathaway Just Did This for the First Time in 15 Quarters. History Offers a Clue About What’s Next, But the Evidence Piling Up Suggests History May Not Repeat Itself.

Investing legend Warren Buffett handed over the chief executive officer reins of Berkshire Hathaway to Greg Abel at the start of the year. Before that, however, Buffett spent many quarters doing more selling of stocks than buying. Why did net sales exceed purchases for a long period? Buffett hasn't answered the question directly, but a comment he made in a recent shareholder letter offers us clear insight:

"Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities," Buffett wrote in the 2024 letter.

Today, Buffett remains chairman of Berkshire Hathaway, while Abel guides investment decisions. And in the recent quarter, Abel made a big move: Berkshire Hathaway just did the following thing for the first time in 15 quarters. History offers a clue about what might come next, but the evidence piling up suggests it may not repeat itself.

Image source: The Motley Fool.

Market-beating returns for 60 years

So, first, let's talk about why we pay close attention to Buffett's moves. The billionaire led Berkshire Hathaway to market-beating returns for 60 years -- that track record solidified Buffett's reputation as an investing superpower. And Buffett is known for sharing his thoughts and advice on investing, so investors may rely on this as well as his stock selections for inspiration.

Buffett hand-picked Abel as a successor, and the billionaire still participates at Berkshire Hathaway to a certain degree. As a result, investors continue to closely watch the company's moves. That brings me to the latest ones, in the second quarter of this year.

As I mentioned above, though Buffett is a strong fan of equities and has continued to buy them throughout market environments, he was a net seller over the past few years. In fact, Berkshire Hathaway was a net seller of stocks for 14 straight quarters -- this included the first quarter of this year under the leadership of Abel.

But in the second quarter, Abel departed from that trend, and for the first time since 2022, Berkshire Hathaway became a net buyer of stocks, with almost $20 billion in purchases. This included a big boost to the Alphabet position, lifting class A shares by 45% and class C shares by more than 600%. Alphabet class A stock now is Berkshire Hathaway's fourth-biggest holding after longtime favorite Coca-Cola.

What happened after 2022

Now, let's consider what may happen next. History shows us that the last time Berkshire Hathaway was a net buyer of stocks, in the third quarter of 2022, the S&P 500 went on to soar -- and this bull market is ongoing.

^SPX data by YCharts

So, we might say that history suggests the S&P now will do the same and climb over the next few years. But it's important to consider other pieces of evidence, particularly relating to the valuation of stocks then and now, and the economic and geopolitical environment.

When Buffett was a net buyer of stocks in 2022, stocks looked a lot cheaper than they do today, and we can see this through the S&P 500 Shiller CAPE ratio, an inflation-adjusted look at stock price in relation to earnings per share.

S&P 500 Shiller CAPE Ratio data by YCharts

In fact, the Shiller CAPE ratio shows that stocks have reached one of their priciest levels ever. The last time stocks were more expensive was during the dot-com bubble back in 2000.

S&P 500 Shiller CAPE Ratio data by YCharts

Meanwhile, interest rate hikes were underway in 2022 to tame inflation; today, inflation is on the rise amid President Donald Trump's tariffs on imports and the conflict in Iran, and the Federal Reserve hasn't yet made a move on interest rates. That creates a certain level of uncertainty, something investors don't like.

All of this means that stocks are less likely to soar than they were back in 2022 when Buffett was a net buyer. Of course, this doesn't mean the S&P 500 will immediately decline. Stocks may have more fuel in the tank in the coming months and quarters. But overall valuations and economic headwinds suggest that a pullback could be on the horizon -- and this emphasizes the importance of investing in quality stocks and holding on for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.