Berkshire Hathaway Hasn’t Done This in Over 3 Years

**Jon Quast** (0:02)
Berkshire Hathaway just did something it hasn't done in three years.
Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm your host today, Jon Quast. I'm joined by Foolish contributors that are always joining me on Monday, Matt Frankel and Rachel Warren. On today's show, we're responding to a mailbag question, and to respond, we're going to pull back the curtain, so to speak, on some AI tooling that we're using in the Hidden Gems universe. But first, we wanted to talk about Berkshire Hathaway because it was busy in the second quarter here. So we do like to talk about Berkshire Hathaway around here. On the one hand, it's a trillion dollar company. And so kind of like Ron Burgundy, it's kind of a big deal. But on the other hand, I think many of us have learned and gleaned wisdom from investing greats like Warren Buffett and Charlie Munger over the years. So we're kind of endeared to the company for that reason. But speaking of Buffett, there is a new sheriff in town at Berkshire and it is not Buffett. It is CEO Greg Abel. And really for the last three years, actually for more than three years, Berkshire Hathaway has been a net seller of stocks. Going back to the first quarter of 2022, and if you look at the S&P 500 returns since the start of 2022, the market is up 63 percent. So Berkshire are really missing out on a big bull market. And yet now all of a sudden, it is no longer a net seller, right, Matt?

**Matt Frankel** (1:35)
Yeah. And first of all, I love how you sneak a Ron Burgundy dad joke right into the into the opener. I love that. But yeah, you're right. Berkshire was a net seller of stocks for 14 consecutive quarters. I'll save you the 2022 math. So the reversal is kind of a big deal. The company was a net buyer of about $20 billion in stocks. They bought about $24 billion. They sold $4 billion.
So it works out to a $20 billion net addition to the portfolio. And that's in addition to buying back about $4.5 billion of its own stock and closing on the acquisition of home builder Taylor Morrison during the quarter, which cost them $8.5 billion by itself. So of course, $10 billion of this was a previously announced private placement in Alphabet stock that added to its position, which I'm sure we'll talk about again sometime in this show. There were a lot of buys. It was a significant addition to the portfolio this quarter.

**Jon Quast** (2:26)
Rachel, I couldn't help but think about this. The stock market does seem somewhat overvalued right now, at least by some metrics that you look at. It seems that way. And Warren Buffett has been known, he's made his mark as a value investor. And so even though the market has risen 63 percent since it became a net seller, I think that investors could kind of wrap their head around the fact that maybe Warren Buffett thinks that it's overvalued and he doesn't want to participate. That kind of makes sense. But now here we have the market at an all time high and now we are reverting to be a net buyer. So I guess I'm just wondering, do you think that new CEO Greg Abel, do you think that he actually does see value and is continuing that value investing mantra of Berkshire Hathaway, that ethos of the company? Or is it something different that maybe he's not quite as a stickler on price as perhaps predecessor was?

**Rachel Warren** (3:21)
I think that's kind of the golden question right now.
This is something Matt mentioned for 14 consecutive quarters, Berkshire was aggressively hoarding cash, kind of signaling the broader market looked vastly overvalued.
Breaking that streak to become a net buyer of nearly $20 billion in a single quarter, especially while the indices are sitting near all time highs. I think it tells us that Abel through Berkshire, they're not just waiting for a market crash. It also doesn't mean that the entire market is cheap. I think we are seeing a lot of overvaluation in a wide range of sectors right now. To me, the bigger takeaway is that under Abel's leadership, Berkshire is aggressively hunting for those high conviction pockets of value. You think about how they just boosted the alphabet stake by about 83 percent, pouring $10 billion through private placement to fund Google's AI infrastructure recently. You're looking at a roughly $38 billion bet that vaults alphabet into Berkshire's top three holdings alongside Apple and American Express. I would argue that Abel, he isn't throwing out the value investing playbook, but I think he's modernizing it for the current era that we're in, with a lot of focus on the dominant tech infrastructure that is fueling a lot of the current stock market and the broader global economy. I know we'll talk about this a bit more in a second, but what makes this shift really interesting is how Abel funded it by cleaning house, trimming some of those financial and retail stakes like Bank of America, Kroger, and then funneling that right back into a lot of these bets into the future of tech and AI. I find that to be really, really fascinating shift.