Since becoming chairman of Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) in the 1960s, Warren Buffett has trounced the market by an almost two-to-one ratio over those 60 years.

By looking for great companies trading at fair prices, rather than fair companies at great prices, and not getting swept up by the mania of the moment (looking at you, artificial intelligence), Buffett has generated cumulative returns far in excess of 4 million percent. In contrast, the S&P 500 has returned just over 31,000%, meaning Buffett’s compound annual gain is 19.8% versus 10.2% for the index.

Yet as AI has gripped the market, valuations have gotten out of hand and across many metrics the benchmark index is overvalued. Though no one knows when a correction will happen, the likelihood of one occurring increases.

Building up a cash buffer

Buffett has indicated he sees one coming. In 2023, he began selling down large, long-held positions and converting them into cash. Berkshire Hathaway now holds $325.2 billion in cash while stakes held in Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), and elsewhere have been cut. Indeed, Apple once accounted for half of Berkshire’s portfolio, but is now less than 23% of the total. He slashed his position in Bank of America by nearly a quarter.

The Oracle of Omaha told shareholders that in any given year his large cash position is a sign of “extreme financial conservatism…akin to an insurance policy on a fortress-like building thought to be fireproof.” Having built up this massive cash firewall suggests Buffett thinks he may just have to file a policy claim. 

While Buffett still adds to his Berkshire Hathaway’s portfolio, such as buying Occidental Petroleum (NYSE:OXY) five times in one week, buying $6.7 billion worth of insurer Chubb (NYSE:CB), or even taking a half-billion-dollar stake in Domino’s (NYSE:DPZ), the overall shift has been to sell.

One stock to rule them all

Yet there is one stock Buffett just can’t help himself from buying. Every single quarter for 25 straight quarters, he bought this one stock every time. Since starting the spending spree, Buffett spent $78 billion on buying its shares.

Last quarter saw a curious incident occur, though. He didn’t buy a single share. Of course, we’re talking about Berkshire Hathaway stock. While it’s not like a regular stock purchase, the buyback of shares was a notable constant for over six years.

It’s important to point out that prior to 2017, Buffett wasn’t able to buy back any shares of Berkshire Hathaway. To do so would have required BRK-A stock to fall to 120% of its book value before Buffett could repurchase shares. 

However, in July of that year, Berkshire’s board changed the rule to allow Buffett to buy back stock if he and the late-Charlie Munger agreed the stock was trading below its intrinsic value. So long as Berkshire holds at least $30 billion worth of cash, equivalents, and Treasury bills, he has a green light to buy. Tax Cut & Jobs Act of 2017 

Green light to buy in 2025

Green may mean go again in 2025. With a record war chest at his disposal, Buffett can use the funds to repurchase more Berkshire Hathaway stock. 

He may have incentive to do so, too. During his first term, President Trump significantly reduced the corporate tax rate from 35% to 21%, which provided business with more cash to buyback stock. There was a tremendous surge in share repurchases in the years that followed and now he wants to cut taxes further.

Trump has proposed reducing rates to 15% for  companies that make products in the U.S. As Berkshire Hathaway is a holding company, it might not apply across the board, but in 2016 Barclays Capital estimated that lowering the rate to 15% could boost Berkshire’s book value by $29 billion while also reducing its net deferred tax liabilities.

As Berkshire Hathaway is Buffett’s favorite stock to buy above all others, it seems a lock that he will be buying back more of its stock in 2025.

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