Is Berkshire Hathaway Stock a Buy?

Many consider Warren Buffett one of the most successful investors of all time. His holding company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) , has grown to become one of the world's largest corporations. Berkshire is famous for its tremendous diversification across different businesses, industries, and stocks while having a massive balance sheet flush with cash at nearly all times.

The stock has outperformed the S&P 500 on average throughout its lifetime, so investors who have bought and held have done well.

But it might not be that simple now. Berkshire recently announced its second-quarter earnings, which included some potential warning signs telling investors to stay away, at least for now.

Here is what you need to know.

Berkshire's cash raise should grab your attention

Buffett's business empire performed well in Q2. The company's total operating earnings grew 15% year over year to approximately $11.6 billion. Berkshire owns dozens of businesses, from consumer brands to railroads and oil and gas pipelines, but the GEICO insurance company was the star performer. GEICO's underwriting earnings almost doubled from a year ago to over $2.2 billion.

But that's not what caught this Foolish investor's attention.

Berkshire has been steadily stockpiling cash on its balance sheet for several years. The company's cash on hand rose from roughly $108 billion in Q2 2022 to $189 billion in first-quarter 2024. Next, consider what Berkshire did in Q2. Buffett ratcheted up its cash to approximately $276.94 billion.

Berkshire added more cash to its balance sheet in Q2 alone than all the cash it added from Q2 2022 through Q1 2024. In other words, Buffett wanted to beef up his balance sheet and do it quickly.

Berkshire has raised cash primarily by selling off chunks of its two most significant holdings: Apple and Bank of America . In Q1, Berkshire trimmed approximately 13% of its massive Apple position, but it sold a whopping 49% of its remaining stake in Q2 to raise over $75 billion.

Apple was a tremendously successful investment , so taking profits isn't the worry here. What's noteworthy is the accelerated selling in Q2. Why speed up? Why sell stock in your largest bank stock? Without speculating too much, could this be a sign Buffett sees trouble coming? Recent economic data shows that the U.S. economy is slowing down, and Wall Street responded with market volatility. Berkshire now owns nearly a quarter-trillion dollars' worth of U.S. Treasury bonds, which are generally a haven from stocks.

Buffett thinks his stock is expensive, too

Okay, I can't read Buffett's mind, but you can interpret his actions -- or, in this case, his inaction.

Berkshire has all this cash, and Buffett has repeatedly praised the concept of share repurchases over the years. However, the company spent a paltry $345 million on buying back its stock in Q2.

A quick look at the data shows why that probably is.

BRK.B Price to Book Value data by YCharts.

On a price-to-book value basis, Berkshire stock isn't all-time expensive. Still, its valuation is the highest in over a decade, going back to roughly 2007, when the market peaked before the global financial crisis in 2008-2009. It seems apparent that Buffett, who famously likes a good deal, doesn't see one in Berkshire stock today.

Here is what this all means

Nobody, including Warren Buffett himself, knows what the economy or the stock market will do in the short term. All anyone can do is read the data and make their best guess. That said, it is possible that Buffett saw an expensive stock market -- including Apple trading at all-time highs on artificial intelligence (AI) expectations -- saw a potentially slowing economy, and decided to take some chips off the table.

The good news is that if a recession does happen, Berkshire Hathaway is arguably the world's most durable business due to its diversification and fortress-like balance sheet. Investors can confidently hold the stock.

But it's hard to see Berkshire Hathaway as a buy today. The stock's valuation is expensive, and Berkshire seems to agree, given the company's unwillingness to buy shares.

If the stock market becomes more volatile over the coming weeks and months, Berkshire stock will be a fantastic buying target for any long-term investor.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy .