Few investors garner as much attention on Wall Street as Berkshire Hathaway‘s (BRK.A 0.50%) (BRK.B 0.52%) billionaire CEO, Warren Buffett. The reason is simple: he outperforms. In his roughly 60 years as CEO of Berkshire, he’s overseen a 5,728,235% cumulative return in his company’s Class A shares (BRK.A), as of the closing bell on Feb. 7. For the sake of comparison, the benchmark S&P 500 (^GSPC 0.03%) has returned 39,447%, including dividends, over the same timeline.

In addition to running circles around Wall Street’s most widely followed stock index, the Oracle of Omaha is an open book. He regularly shares what he’s learned as an investor and what traits he looks for in current/future investments during Berkshire’s annual meeting and in his yearly letter to shareholders.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

While Buffett is an unwavering optimist who’s repeatedly cautioned investors to never bet against America, his short-term actions aren’t always going to line up with the long-term ethos he preaches.

When Berkshire Hathaway unveils its Form 13F filing after the closing bell on Friday, Feb. 14, it’ll likely confirm Warren Buffett’s ninth-consecutive quarter as a net seller of stocks.

Warren Buffett’s $166 billion silent warning to Wall Street grows louder

Money managers with at least $100 million in assets under management are required to file a 13F with the Securities and Exchange Commission (SEC) no later than 45 calendar days following the end to a quarter. This filing details the holdings of a fund and allows investors to see which stocks Wall Street’s brightest asset managers purchased and sold in the latest quarter.

Friday, Feb. 14., marks the deadline for 13Fs to be filed with the SEC for trading activity in the December-ended quarter. Berkshire Hathaway always files its 13F following the market close on the deadline day.

Based on Berkshire’s 13Fs, as well as the company’s cash flow statements from its quarterly operating results, Buffett and his top advisors (Todd Combs and Ted Weschler) have sold more stocks (in terms of market value) than they’ve purchased for eight straight quarters (Oct. 1, 2022 through Sept. 30, 2024). The cumulative total of this net-selling activity is $166.2 billion, which has helped to push Berkshire Hathaway’s cash balance to an all-time record $325.2 billion.

Though we don’t know every detail of what Berkshire’s brightest investment minds have been up to, Form 4 filings with the SEC offer clues that suggest this selling activity persisted during the fourth quarter.

Despite purchasing a combined $795.8 million worth of Sirius XM Holdings, Occidental Petroleum, and VeriSign stock during the fourth quarter, Form 4 filings show that $1.275 billion worth of Bank of America (BAC 0.26%) stock was also sold. Keep in mind that Berkshire no longer had to report sales of Bank of America stock after Oct. 15, which is when its ownership stake in BofA dipped below 10%. Thus, sales may have continued throughout the quarter.

Likewise, Buffett has been a persistent seller of Berkshire’s top holding, Apple (AAPL 2.18%), in the each of the previous four quarters. The more than 615 million shares of Apple sold over the trailing year (ended Sept. 30) represents 67% of the more than 915 million shares once held by Buffett’s company.

Image source: Getty Images.

The Oracle of Omaha is a value investor — and value is tough to come by at the moment

To reiterate, Warren Buffett is a long-term optimist who won’t bet against America or its stock market. History shows this is a smart approach, as recessions and bear markets are historically short-lived, while periods of economic growth and bull markets often stick around for multiple years.

But above all else, Warren Buffett is a value investor. No matter how much he appreciates a company or its leadership, if the valuation doesn’t make sense, he won’t be a buyer.

Apple, for instance, has seen its physical product growth engine completely stall. Although its subscription-driven services segment is delivering sustained double-digit sales growth, revenue for iPhone and other physical devices has been stagnant or declined. The end result for Apple is a two-year drop-off in net income and one of its priciest valuation multiples of the trailing decade.

Bank of America isn’t the screaming bargain it once was, either. When Berkshire acquired $5 billion worth of preferred BofA stock in August 2011, the company was trading at a 62% discount to its book value. As of Feb. 7, BofA closed at 34% premium to its book value.

Perhaps the bigger issue for Berkshire’s chief isn’t the valuation of the stocks his company holds so much as the lack of value across the broader market, which makes locating bargains difficult.

S&P 500 Shiller CAPE Ratio data by YCharts.

Although it’s not a valuation tool used by Warren Buffett, the S&P 500’s Shiller price-to-earnings (P/E) Ratio, also known as the cyclically adjusted P/E Ratio (CAPE Ratio), serves as the ideal example of why finding a good deal is so tough at the moment.

The Shiller P/E is based on average inflation-adjusted earnings over the prior 10 years. Analyzing a decade’s worth of earnings data helps to ensure that shock events can’t skew this ratio.

When the closing bell rang on Feb. 7, the S&P 500’s Shiller P/E finished at 37.96, which is not too far away from its closing high of 38.89 for the current bull market. It is, however, more than double the average Shiller P/E reading of 17.21, when back-tested 154 years.

Historically, Shiller P/E readings above 30 have eventually (key word!) given way to declines in the S&P 500 or other major stock market indexes of 20% to 89%.

The “Buffett Indicator,” which is named after the Oracle of Omaha, also reached uncharted territory. This indicator, which Buffett endorsed in a Fortune magazine interview in 2001 as, “probably the best single measure of where valuations stand at any given moment,” divides the total market cap of U.S. stocks into U.S. gross domestic product (GDP).

Since 1970, the Buffett Indicator has averaged a reading of 85% — i.e., the total value of all stocks equals about 85% the value of U.S. GDP. Last month, it topped 207%.

With stock valuations at or near historic highs, all clues point to Warren Buffett’s stock-selling streak extending to a ninth quarter.