Ask Warren Buffett what stocks he thinks you should buy — and his answer is simple: S&P 500 index funds. So why did Buffett just sell them himself?
Buffett's Berkshire Hathaway unloaded its entire positions in two S&P 500 ETFs: SPDR S&P 500 ETF Trust and Vanguard S&P 500 ETF in the fourth quarter, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. The sales were reported in a mid-February financial disclosure.
Unloading these funds goes against the advice Buffett gave to investors in the 2016 Berkshire Hathaway annual report. "The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients," Buffett wrote. "Both large and small investors should stick with low-cost index funds."
So why isn't Buffett taking his own advice?
Buffett's Long History With S&P 500 ETFs
Buffett has long put his portfolio where his mouth is by owning those ETFs.
Berkshire Hathaway first added 39,400 shares of SPDR S&P 500 ETF Trust in the fourth quarter of 2019. And he held those shares until unloading them all in December 2024.
Similarly, Berkshire Hathaway also first picked up 43,000 shares of Vanguard S&P 500 — now the world's largest ETF — in the fourth quarter of 2019. That position is now completely sold.
Buffett hasn't said yet why he ditched those funds. But many investors are increasingly worried the S&P 500 is dominated by just a handful of expensive technology stocks. Just a hiccup at one of them could hammer the index. Just eight stocks in the 500 account for a third of the entire index's value.
Additionally, the valuation of the S&P 500 is getting lofty by historical standards. The forward 12-month P-E ratio is 22.2, says John Butters of FactSet. That P-E ratio is above the five-year average of 19.8 and above the 10-year average of 18.3, he says.
Not Entirely Out Of S&P 500
Buffett's Berkshire Hathaway may have dumped its S&P 500 ETFs. But it still owns plenty of individual S&P 500 stocks.
Bank of America, Coca-Cola and Kraft Heinz are still major positions for Buffett. As is Apple, a giant that accounts for 6% of the S&P 500's value.
But there's definitely some pulling back going on. Berkshire Hathaway reported third-quarter cash and short-term investments of $325.2 billion, up 94% from the second quarter.
And now Buffett's sale of the S&P 500 ETFs he has owned for years is the latest sign of retrenching from the stock market.
Buffett's Biggest Sales In Fourth Quarter
Positions in S&P 500 ETFs are now zero
| Company | Ticker | Q4 ch. in shares owned (millions) |
|---|---|---|
| Bank of America | BAC | -117.4 |
| Nu Holdings | NU | -46.3 |
| Citigroup | C | -40.6 |
| Capital One Financial | COF | -1.7 |
| Formula One Group | FWONK | -0.9 |
| Charter Communications | CHTR | -0.8 |
| T-Mobile US | TMUS | -0.3 |
| Louisiana-Pacific | LPX | -0.3 |
| DaVita | DVA | -0.2 |
| Vanguard S&P 500 ETF | VOO | -0.04 |
| SPDR S&P 500 ETF Trust | SPY | -0.04 |
| Ulta Beauty | ULTA | -0.02 |
