Has Warren Buffett stopped investing? He seems to be pulling money out of the stock market left, right and centre. He’s sold billions in Bank of America shares. He’s sold tens of billions of Apple shares.
The cash position (of his firm Berkshire Hathaway) has ballooned to $334bn. That’s the kind of hoarding that would grab The Hobbit dragon Smaug’s attention.
The multi-billionaire market mogul, the ’Oracle of Omaha’, the most famous investor worldwide, has taken a big old look at the markets and gone ‘nope!’
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Good times rolling
What’s going on here then? Has the stock market been performing badly? No. That’s not it. Last year’s trend of the markets smashing record highs continues in 2025 unabated. The S&P 500 broke through 6,100 in February.
Anyone investing even a year ago is up 18%. The good times continue to roll and therein may lie the problem. Times have been a little too good.
Buffett can boast of a chunky repertoire of famous quotes, but the most famous of all might be: “Be fearful when others are greedy, and greedy when others are fearful.”
The basic idea is when everyone is doing one thing, do the other. Zig when they zag, as they say. American stocks have had a rapid rise. It’s got to the point where folks from all corners the world are now banking on the S&P 500 as their pension option. Has it all got a bit too much?
The sky-high valuations of US stocks suggest so. Investing in companies across the pond costs a pretty penny these days. That’s the complete opposite approach to value investing where looking for underpriced stocks is the mantra.
One approach
Value investing, by the way, was Buffett’s modus operandi as he built his fortune, crediting much of his success to his mentor Ben Graham who popularised the idea. If Buffett’s looking for value investments today, I wouldn’t be surprised if he grimaces at American valuations that are more than a touch reminiscent of those just before the dotcom crash.
Value investing isn’t just about avoiding overpriced stocks though, it’s about finding underpriced ones too. And one place where stocks are undoubtedly at a cheap ebb is in the UK where the FTSE 100 average price-to-earnings ratio of 14 is around half that of the S&P 500.
Take BP (LSE: BP) as one example. The oil major trades at around 10 times earnings. Compare that to US competitors like ExxonMobil at 14 times earnings, or Chevron at 16 times earnings. As far as what you’re paying for each pound (or dollar) of profit, the British firm’s cheaper.
Is BP a buy for me? Well, there’s a lot of uncertainty around the firm at the moment. Profits fell sharply in the last year. The fall has led to activist investors getting involved and, among other things, calling for the end to its Net Zero efforts.
Those aren’t small hurdles the company’s facing, if they can get over them smoothly then this could be an excellent value opportunity.
Not only do the shares trade at a discount to its peers but investors could buy in today for 20% less than it would have cost last year. I’d say that could be one to consider.
