Berkshire Hathaway Stock Is Telling Investors Exactly What Buffett Wants

I have to admit, it’s a little intimidating to be writing about Berkshire Hathaway (NYSE:BRK.B). I know Warren Buffett is just a man. But the man has been wildly successful and made plenty of others wealthy along the way. So what can I possibly add to the discussion about Berkshire Hathaway stock?

A Berkshire Hathaway (BRK.A, BRK.B) sign sits out front of an office in Lafayette, Indiana.

Source: Jonathan Weiss /

It seems there are some traders who are getting a tad bit miffed at Mr. Buffett. He didn’t go on a buying spree back in May. But I think it’s time to follow some advice that would help in other aspects of life. And that is sometimes people will honestly tell you exactly what their intentions are.

In the case of Buffett, he’s told investors he isn’t buying because he doesn’t think there’s anything of value to buy. And maybe he’s right.

The market has been full of FOMO this year. Investors are lamenting the run-up in stock prices. And many of those same investors are chasing anything that shows a smidge of movement.

Why Is Berkshire Hathaway Stock Underperforming?

In my opinion, the underperformance of Berkshire Hathaway stock (at least this year) is due to Buffett simply sitting things out.

“We have not done anything, because we don’t see anything that attractive to do,” the Oracle of Omaha quipped during the company’s May shareholder’s meeting. “Now that could change very quickly or it may not change.”

As traders frequently point out in chat rooms, Buffett is sitting on a pile of cash. At the end of the first quarter, the company had a record $137 billion in cash and equivalent instruments on the balance sheet.

But another reason why the stock may be underperforming is that five stocks make up over 75% of its holdings. Those stocks are Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Coca-Cola (NYSE:KO), American Express (NYSE:AXP) and Kraft Heinz (NASDAQ:KHC). In fact Apple counts for almost half of Berkshire’s invested assets.

And how are these stocks performing?

  • Apple – up 54%
  • Bank of America – down 33%
  • Coca-Cola – down 9.7%
  • American Express – down -18.5%
  • Kraft Heinz – flat

So I guess from that perspective investors might be glad Berkshire Hathaway stock is “only” down about 8% for the year (at the time of this writing).

Let the Buyer Beware

There is a saying about learning the lessons of history. In this case, investors of a certain age can remember the dot-com bubble. But many investors today, particularly the aggressive day traders and Robinhood traders were barely alive. They certainly aren’t conditioned to believe that stocks don’t have a divine right to always move higher.

I’m not boldly calling for a bear market. I am pointing out that many people were calling a bubble before the pandemic hit. Yes the air came out of the market in March. But that was overdone. And so, dare I say it, may be the melt up.

And maybe all Buffett is signaling is what he’s always signaled. Buy companies for the long-term. He’s certainly doing that. And look for companies that are undervalued. He’s apparently not seeing a lot of that.

Electric vehicle (EV) stocks are moving higher just because they have something to do with EVs. Some zombie stocks are being kept alive by investors who are taking a moonshot on rockets that have no fuel.

Buffett has famously said to buy when others are fearful. But the opposite is also true. Buffett is not bearish on stocks, but seems to be making it clear, it’s time for caution. That seems like good advice as we head into the rest of an already crazy year.

So instead of wondering what’s wrong with Berkshire Hathaway stock, maybe it’s time to look at what’s right.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.

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