Key Points:

• Warren Buffett sold large portions of Apple and Bank of America but didn’t buy Berkshire shares, signaling market caution.
• He’s holding significant cash, possibly anticipating a market downturn.
• Recent buys, like Ulta Beauty, show his focus on discounted, stable investments.
• Warren Buffett’s recent sales and cash holdings signal caution so better check out these 2 dividend legends for a port in the storm. 

Douglas and Lee discuss Warren Buffett’s recent activity in the market, focusing on his decisions to sell significant portions of his holdings in Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC). Interestingly, despite having a habit of buying back Berkshire Hathaway stock (NYSE: BRK-B), Buffett didn’t make any purchases this time, suggesting that he might believe the stock is fully valued at its current levels. They speculate that Buffett may be anticipating a market downturn, possibly holding onto cash to take advantage of better buying opportunities in the future. They also consider the possibility that Buffett is preparing for an economic slowdown or even a mild recession, which could justify his cautious approach. The conversation ends with plans to revisit Buffett’s next moves after his upcoming 13F filings are released.

Transcript:

Our good friend Warren Buffett in the market again, buying and selling and not buying.

So tell me what happened. What was the pattern with Warren Buffett this time in terms of buying?

Well, we all know that, and we’ve talked about this recently, that he went in and sold half the Apple stake, which was just gigantic.

And the thing that’s really interesting here is he sold another huge chunk of Bank of America, which is something he’s owned for a long time, a long time.

Not as long as Coca-Cola, but close to it.

But an interesting thing that I noticed when reading through his work and his filings is that he didn’t buy any Berkshire Hathaway.

He typically will go in and use some of his gains and buy some stock.

He didn’t buy any this time, which is making me wonder, does he think it’s fully valued at these levels?

Well…

Is it at a 52-week high? I haven’t looked.

I think it’s close to it. I could look.

Well, look, it’s worthless to try to think what Buffett thinks, but everything is near an all-time high.

And it may be that he just thinks the market in general is near a top.

If that’s true, it probably means that Berkshire Hathaway is near a top.

That doesn’t mean it’s a good or a bad company.

But if I were in his shoes, he is stuffing money into cash.

It’s incredible.

If you believe you’re near a top, you may not even buy your own stock.

So I’m going to give you a theory. I don’t know.

But my theory is that he’s probably not a big buyer of anything right now.

No.

Well, as we talked about recently as well, the only thing he bought after that huge Apple sale was he did buy the Chubb back in earlier this year, which was substantial.

But he bought Ulta, the very, very, very popular cosmetics chain.

But he bought that at a substantial discount to where it’s traded over the last two years.

So that’s all I’ve even seen.

So I get the true sense that he thinks that something’s brewing.

And look, he didn’t sell Apple at the top top, but he already had a huge amount of profit in there.

Oh, yeah.

And Apple’s had a choppy year.

You can’t say, oh, God, Apple’s had a typical year.

You know, every quarter was better than the next quarter.

An iPhone sales set a record.

I mean, Apple’s uttering some.

So he looks pretty smart about that.

Yeah.

And you get the sense at this juncture that he’s…

He hasn’t come out and given any doomsday warnings or anything like that.

But this all reeks of somebody.

I mean, when you have…

I guess he doesn’t have quite that much anymore.

But when you have 280 billion in short-term treasuries and T-bills and own more than the Fed does, you can’t be super positive because you would think if that was the case, he’d put it to work.

You’d put that money to work.

Absolutely. At least some of it.

And there’s a bunch of, you know, blue chip sort of dividend paying stocks that we cover at 24/7 all the time that are nowhere near their 52-week high.

But I think he’s anticipating a drawdown that could be 10, 15, or 20% where he really has a chance to go in and use that cash.

Well, I don’t believe this, but in the last week or so, you’re seeing more and more articles about the fact that the United States may already be in a recession.

Now, I’m not saying I believe that, but even if you’re looking at a slowdown where your GDP is 1%, the growth rate’s 1% compared to what’s been pretty good for two years,

it may be that the economy is slowing down.

If the economy slows down at some point, it catches up with the stock market.

Who knows when?

But even with the Fed saying it’s going to lower rates, it’s not going to drop by a point or something.

It’s not…

People are not going to go out and set their hair on fire.

So maybe that Warren Buffett just says to himself, there’s nothing wrong with every once in a while doing nothing.

Well, you know, he’s used that rope-a-dope tactic for the last 50 years that seems to have worked pretty good.

You know, one thing that’s really evident is that the stock market and the bond market has already priced in a bunch of rate decreases already.

I mean, it’s like fully valued at the highest it’s ever been.

Bonds sold off drastically. The 10-year yield went back under 4%.

They’ve already priced it in.

So what is a 25 basis point?

And then I heard today where they were saying, well, there’s going to be four cuts this year.

That would mean one in, you know, every meeting to the end of the year.

And I don’t see that either.

Well, you also have said to me a number of times, the Fed doesn’t like to put its finger on too heavily with an election coming.

So look, they have to make a token cut. I get that.

That’ll come up here.

But I do not see them going September, October, November, basically going into the jaws of an election.

I don’t think that they’re going to put the finger on the scale that way.

Well, and again, at this juncture, what’s it going to do?

How much is left up in the upside to the market?

And of course, you know, this is today when we’re recording this, Jackson Hole Day.

And he confirmed that they’re going to cut.

Well, okay.

Everybody knew that anyway.

Going in.

Yeah.

Yeah.

Let’s do this.

Let’s come back to this when Buffett’s in the next cycle and see if he does go back to buying Berkshire.

Yeah, and it’ll be interesting to see when his next 13F filings come out at the end of the quarter, if he’s gone in and bought anything else.

Because I don’t think other than the Ulta purchase that I’ve seen anything lately.

No.

No.

All right, we’ll come back after he makes his next filing.

We’ll look at everything, but it’ll be interesting to see, did he do anything with Berkshire?

Yeah, it’ll be really interesting to see if he goes, and I think unless it has a dramatic sell-off, I don’t think he will.

No.

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