Warren Buffett Just Sent a $277 Billion Warning to Stock Investors

Warren Buffett is considered one of the greatest investors of all time, and he has the track record to prove it. He has taken Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) From a struggling textile company in the 1960s, Berkshire Hathaway has grown into a massive $900 billion conglomerate by buying valuable businesses at a fair price. Since Buffett took over the company, Berkshire Hathaway’s stock has grown at an average compound annual rate of 19.8%, well above the 10.2% the company reports. S&P 500 over the same period.

Buffett is responsible for nearly all of Berkshire’s stock portfolio and manages the company’s cash flow. But last quarter was the biggest warning yet: Buffett doesn’t see much to like about the current stock market. That’s reflected in Berkshire’s cash and Treasury holdings, which jumped to $277 billion in the second quarter, $88 billion more than the previous quarter.

Here’s how Berkshire got here and what it means for investors.

Buffett Just Made His Biggest Stock Sale Ever

Buffett sold more than $77 billion worth of stocks in the second quarter. That’s far more than anything Buffett has ever sold in a given year, let alone in a single quarter. With just $1.6 billion in stock purchases in the last quarter, that makes seven consecutive quarters where Buffett has been a net seller of stocks.

By far the biggest stock sale was Buffett’s decision to reduce Berkshire’s position in Apple (NASDAQ: AAPL). At one point, Apple represented nearly 50% of Berkshire’s total portfolio. As of June 30, Berkshire’s Apple shares were worth $84.2 billion, or 29.5% of the company’s stock investments. That suggests a sale of about half of Berkshire’s Apple shares in the last quarter.

This is the third consecutive quarter Buffett Reduces His Stake in Applea company he called “a better company than any we own” at last year’s shareholder meeting. He explained his reasoning for the sale at the last shareholder meeting. He believes the current corporate tax code is very favorable and is willing to pay taxes now to avoid higher taxes later. Berkshire is sitting on a massive capital gain from its investment in Apple.

Buffett also reduced another of his major holdings since the end of the quarter, selling $3.8 billion worth. Bank of America (NYSE: BAC) since mid-July. Berkshire is also making a substantial gain on these stocks.

That said, it’s one thing to strategically take capital gains to lock in a low tax rate. But Buffett could reinvest that money (minus the estimated tax bill) immediately if he saw good opportunities in the market. He could even immediately buy back the stocks he sold without any penalty since the sell-at-loss rule doesn’t apply to capital gains, only capital losses.

The story continues

Even Buffett’s penchant for buying a particular stock month after month seems to have disappeared in today’s market.

Buffett bought this stock for 24 straight months…then stopped

Although Buffett has consistently…