Did Warren Buffett Use Berkshire Hathaway's $334 Billion in Cash to Buy His Favorite Stock? We're About to Find Out...

There aren't many (if any) money managers who garner as much attention from investors as Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. The dubbed "Oracle of Omaha" has earned his praise after overseeing a greater than 6,475,000% cumulative return in his company's Class A shares (BRK.A) since becoming CEO six decades ago.

Riding Buffett's coattails and mirroring his trading activity has been a surefire investment strategy over long periods. Perusing quarterly filed Form 13Fs provides a way for investors to comb over which stocks Buffett and his top advisors, Todd Combs and Ted Weschler, have been buying and selling.

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Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

However, Berkshire Hathaway's 13Fs fail to encompass the full scope of the Oracle of Omaha's trading activity. The company's quarterly operating results provide invaluable insight into the purchasing history of Warren Buffett's favorite stock, which isn't listed in Berkshire's 13Fs.

Mere hours from now, on Saturday, May 3, Berkshire Hathaway is set to release its first-quarter operating results, and the big question investors want answered will be known: Did Warren Buffett put some of his company's $334 billion treasure chest to work in his favorite stock?

Was Warren Buffett a net seller of stocks for a 10th consecutive quarter?

While most headlines are likely to focus on Berkshire Hathaway's expected sales and operating earnings growth (sans unrealized investment gains/losses) during the March-ended quarter, one of the more intriguing questions we'll very shortly have an answer to is if Buffett was a net buyer or seller of stocks to begin 2025.

In each of the previous nine quarters (Oct. 1, 2022 through Dec. 31, 2024), Berkshire Hathaway's cash flow statements have shown that more stocks have been collectively sold than purchased. The aggregate total of this net-selling activity over the prior nine quarters equates to almost $173 billion.

Sizable selling activity in core positions like Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC) helped boost Berkshire Hathaway's cash pile (this includes cash, cash equivalents, and U.S. Treasuries) to a record $334.2 billion to end 2024.

Although the Oracle of Omaha has spoken fondly of Apple and Bank of America, which still respectively account for $63.4 billion and $27.2 billion of Berkshire's $277 billion of invested assets, he remains an unwavering value investor at heart. Apple's trailing-12-month price-to-earnings (P/E) ratio topped 40 in December, while BofA's premium to book value surpassed 30% earlier this year. Neither are the screaming bargains they once were.

On a broader scale, the stock market entered 2025 at one of its priciest valuations in history, when back-tested to January 1871. In December, the S&P 500's Shiller P/E Ratio, which is also referred to as the cyclically adjusted P/E Ratio (CAPE Ratio), nearly hit 39. To put this figure into context, the average Shiller P/E reading over the last 154 years is 17.23.

The five other times throughout history where the Shiller P/E Ratio surpassed 30 were all eventually followed by declines in the benchmark index of at least 20%.

Even though Warren Buffett would never bet against the U.S. economy or the stock market, he's an unwavering stickler for value. Berkshire's first-quarter cash flow statement will reveal whether or not he found any perceived bargains.

Image source: Getty Images.

Buffett has spent $78 billion buying his favorite stock since mid-2018 -- did he buy even more?

But beyond just determining if Warren Buffett was a net buyer or seller of stocks, investors should pay very close attention as to whether or not Berkshire's chief took the plunge and purchased even more shares of his favorite company.

As noted, the Oracle of Omaha's favorite stock isn't going to be found in Berkshire's quarterly 13Fs. Rather, details of Buffett's purchasing activity can be found on the final page of his company's quarterly operating results, just prior to the executive certifications. The reason you'll only find this information in the company's operating results is because his favorite stock to buy is shares of Berkshire Hathaway!

Prior to the midpoint of 2018, Berkshire's chief was hamstrung by his company's buyback policy. Repurchases could only be undertaken if Berkshire Hathaway's share price fell to or below 120% of book value (i.e., no more than a 20% premium to book value, as of the most recent quarter). Berkshire's stock simply never fell to this threshold, which resulted in not one penny being put toward buybacks.

On July 17, 2018, Berkshire's board updated its share repurchase rules to allow its chief, along with now-late right-hand man Charlie Munger, more autonomy to buy back shares and reward long-term investors. The new criteria allow Buffett to repurchase his company's stock with no ceiling or end date as long as:

• Berkshire Hathaway has at least $30 billion in combined cash, cash equivalents, and marketable securities on its balance sheet; and
• Buffett believes shares of his company are intrinsically cheap.

For 24 consecutive quarters (July 1, 2018 through June 30, 2024), Warren Buffett purchased shares of his company's stock, with the aggregate total of these buybacks nearing $78 billion. For the sake of comparison, the amount of money Buffett has put toward buybacks in less than seven years handily eclipses the cost bases for Apple, Bank of America, American Express, Coca-Cola, Chevron, and Occidental Petroleum, combined!

However, Berkshire's chief passed on purchasing his company's shares during the respective third and fourth quarters of 2024. It marked the first time since the share buyback rules were changed in July 2018 that Berkshire Hathaway's biggest cheerleader wasn't a buyer.

There's arguably not a more meaningful measure of Warren Buffett's investing sentiment than his purchasing activity, or lack thereof, with his favorite stock.

The one concern is that Berkshire Hathaway stock is nearing an 80% premium to its book value, which is a level that hasn't been consistently seen in more than 16 years. Buffett is a value investor, first and foremost, and a 78% premium to book (as of April 29) may simply be too rich of a price to pay, even with a record $334 billion in his company's proverbial treasure chest.

In short order, we're going to get feel for what the Oracle of Omaha really thinks about Wall Street valuations, including that of his own company.

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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.