2024 was a fairly pleasant year for billionaire Warren Buffett and investors in general. After suffering the correction in 2022, the stock markets in the US and UK were back on track for success. And the shares of his investment vehicle, Berkshire-Hathaway (NYSE:BRK.B) have risen double digits since January.

As encouraging as it is that investor sentiment is improving along with economic conditions, there are also warning signs that could point to a decline. In fact, the Bank of England (BoE) recently flagged the danger that investors could become complacent. And if that’s true, following Buffett’s key advice now could be a smart move.

“Be fearful when others are greedy”

A well-known maverick, the “Oracle of Omaha” is known for not going with the crowd. This has been evident in recent years when he aggressively bought stocks while the rest of the world sold in a panic. With stock prices on the rise this year, does that mean now is the right time to start selling?

The BoE stressed that asset prices in the UK are high compared to historical levels and suggested that investors are not giving enough weight to inflation risks and geopolitical conflicts that could derail the picture.

The US Federal Reserve has made similar comments, particularly regarding the technology sector. And Buffett’s team at Berkshire has indeed sold large amounts of stocks. Apple this year. It really sounds like he’s following his own advice.

Has the source of money come to an end?

On the surface, it looks like Buffett is preparing for the worst. After all, the sale pushed the company’s cash holdings up to around $189 billion – a new record. This suggests that he is hoarding cash. But there is another explanation.

Even after selling a large portion of Apple shares, the tech giant still represents nearly 40% of Berkshire’s investment portfolio. The fact that he hasn’t sold more to achieve better diversification suggests that his long-term commitment as a shareholder hasn’t changed regardless of the macroeconomic landscape.

And what about the statements from central banks? Although they are worrying, it should be noted that the forecasts of the BoE and the Fed are rather poor. In fact, the former had already predicted a sharp correction at the beginning of the year, but this did not materialize.

Hope for the best, prepare for the worst

Another correction or even a crash in the stock markets is inevitable. But no one can predict exactly when such an event will take place. During bull markets, there are always pessimistic predictions of a crash, the vast majority of which do not come true. That’s why Buffett always focuses on the long-term game. And that’s exactly what he seems to be doing right now.

The story continues

He has enormous amounts of capital in the bank and is ready to take bargains if the stock price falls again.

The post This is what Warren Buffett is doing: While stock markets rise, first appeared on The Motley Fool UK.

Further reading

Zaven Boyrazian does not own any of the stocks mentioned. The Motley Fool UK does not own any of the stocks mentioned. The views expressed in this article about the companies mentioned in this article are those of the author and as such may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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