Warren Buffett’s Successor, Greg Abel, Just Ended Berkshire Hathaway’s 14-Quarter Selling Streak. Is This the Screaming Buy Signal Investors Have Been Waiting For?
Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) just reported strong second-quarter earnings, with operating income rising over 16% year-over-year. Notably, the company’s massive cash hoard declined from over $397 billion in the first quarter to $365.5 billion by the end of the second quarter, as CEO Greg Abel began putting cash to work. Missed Nvidia in 2009? This Rare…
Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) just reported strong second-quarter earnings, with operating income rising over 16% year-over-year.
Notably, the company’s massive cash hoard declined from over $397 billion in the first quarter to $365.5 billion by the end of the second quarter, as CEO Greg Abel began putting cash to work.
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Even more interesting is that Berkshire was a net buyer of stocks in the second quarter. According to quarterly reports filed with the Securities and Exchange Commission, the large conglomerate purchased nearly $23.5 billion in stocks in the second quarter and sold only about $3.7 billion.
In the 14 quarters prior, Berkshire had been a net seller of stocks. Is this the screaming buy signal that investors have been waiting for?
Image source: The Motley Fool.
What did Berkshire buy in the second quarter?
We won’t know exactly which stocks Berkshire bought and sold in the second quarter until the company files its 13F form, which will likely occur after the market closes on Aug. 14.
However, we do know that on June 1, Berkshire announced it had purchased $10 billion of Alphabet Class A and Class C shares in a private placement.
Alphabet is now a top five position in Berkshire’s roughly $355 billion equities portfolio and represents one of the clearest bets on artificial intelligence that Berkshire has made.
Berkshire also announced the acquisition of Taylor Morrison Homes in the second quarter for $6.8 billion.
However, being an acquisition, it wouldn’t be included in the “purchase of equity securities” line on Berkshire’s cash flow statement. The deal also didn’t close until after the quarter ended, so more financial details won’t be made public until third-quarter earnings materials are reported.
Berkshire also repurchased about $4.5 billion of its own stock in the quarter. That’s significant, considering Berkshire repurchased no stock in 2025 and only about $2.9 billion in 2024.
Is this a screaming buy signal?
While net stock buying and the restart of share repurchases certainly appear constructive, I don’t think investors should get too excited just yet.
Warren Buffett led Berkshire Hathaway for six decades, generated incredible returns, and is viewed as the greatest investor of all time.
While Buffett has all the confidence in the world in Abel, he will never be able to fill the shoes of Buffett and, therefore, will not be given the same leeway by the market.
So while investors may have found it acceptable for Buffett to hoard nearly $400 billion in cash, Abel is likely expected to put some of it to work through more stock purchases and by repurchasing Berkshire stock.
An investment in Alphabet allows Abel to show investors that he is not completely ignoring AI while also buying a company that should be able to navigate a more difficult environment for the AI trade, if one occurs.
Removing the $10 billion of stock attributed to Alphabet, Berkshire’s net purchases come out to roughly $10 billion, which is not insignificant but not necessarily a screaming buy signal either.
I also think it’s important to note that the Buffett indicator, which measures the Wilshire 5000 relative to gross domestic product (GDP), remains at an all-time high of 232%.
Buffett has called this “probably the best single measure of where valuations stand at any given moment.” Buffett has also publicly said that investors have been “gambling” and it’s difficult to find value right now.
Given that Abel and Buffett still work together closely, I don’t think these more constructive moves in the second quarter are a screaming buy signal.
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Bram Berkowitz 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.
Warren Buffett’s Successor, Greg Abel, Just Ended Berkshire Hathaway’s 14-Quarter Selling Streak. Is This the Screaming Buy Signal Investors Have Been Waiting For? was originally published by The Motley Fool
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