The July jobs report and the subsequent market sell-off last week ignited fears of a looming recession. The mainstream media has been aggressively downplaying those fears, knowing that a recession would doom the Harris campaign. Yet signs continue to point to economic turmoil ahead. If you need more proof that trouble is on the horizon, then look no further than the recent actions of the left-wing billionaire Warren Buffett.
According to a recent report, Buffett sold $77 billion worth of stocks in Q2. "That far exceeds any amount Buffett has ever sold in any given year, let alone in a single quarter," explains the Motley Fool, an investment guidance site. "With just $1.6 billion in stock purchases last quarter, that makes seven straight quarters where Buffett has been a net seller of stocks." This, according to the article, was "the biggest warning yet that Buffett doesn't see a lot to like in the current stock market."
By far the biggest stock sale was Buffett's decision to trim Berkshire's position in Apple (NASDAQ: AAPL). At one point, Apple accounted for nearly 50% of Berkshire's entire portfolio. As of June 30, though, Berkshire's Apple shares were worth $84.2 billion, or 29.5% of the company's equity investments. That suggests a sale of about half of Berkshire's Apple shares last quarter.
That's the third straight quarter Buffett has trimmed his stake in Apple, a company he called "a better business than any we own" at last year's shareholder meeting. He explained his reasoning behind the sales at the most recent shareholder meeting. He views the current tax code for corporations as very favorable, and he's willing to pay taxes now, so he can avoid higher taxes later. Berkshire is sitting on a massive capital gain from its Apple investment.
Buffett has also been trimming another top holding since the end of the quarter -- he's sold $3.8 billion worth of Bank of America (NYSE: BAC) stock since mid-July. Berkshire is taking a substantial gain on those shares as well.
That said, it's one thing to strategically take capital gains to lock in a low tax rate. But Buffett could reinvest that cash (less the estimated tax bill) right away if he saw good opportunities in the market. He could even immediately buy back the shares he sold without any penalty since the wash sale rule doesn't apply for capital gains, only capital losses.
According to the report, Buffett has sold more stocks than he has bought for nearly two years, but he has consistently used Berkshire Hathaway's extra cash to repurchase its own shares. Since revamping the share buyback program in 2018, Buffett has rarely skipped a month of repurchases.
However, in June, he didn't buy back any shares for the first time since May 2022, with the entire quarter's buybacks totaling just $345 million — the smallest since 2018. Buffett's caution on repurchases indicates that he doesn't see his own stock as a good value currently, leading to growing cash and Treasury holdings.
Related: Recession Fears Continue
"While Buffett is always bullish on the American economy in the long term, he doesn't seem to see a lot of great investments in the stock market right now," the report continues. "Valuations are stretched, and future expected returns don't look as good as in the recent past. Investors may have a tough time finding good value in today's market even after the recent pullback in stocks. Despite the recent sell-off, the S&P 500 still trades at around the same level as it did in May."
Something is definitely up.
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