This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Warren Buffett gave investors big news last weekend. During the Berkshire Hathaway shareholder meeting, the billionaire investor said he would step down from his chief executive officer role at the end of the year after 60 years at the helm.
Buffett will remain chairman, but he aims to turn over investing oversight to Greg Abel, the company's vice chairman of non-insurance operations. The board of directors followed up by unanimously voting in favor of the move, paving the way for Abel to take over as of Jan. 1, 2026.
Meanwhile, Buffett remains in the position for about seven and a half months and has a record level of cash available to invest if opportunities arise. The investing giant has been a net seller of stocks over the past 10 quarters, even lowering holdings of some of his favorite stocks, such as Apple and Bank of America. This has helped him increase Berkshire Hathaway's cash to $348 billion, its highest level ever.
Will Buffett hand this cash level -- or even more -- over to the leadership of Abel next year, or will the Oracle of Omaha deploy some of it in the months to come? My prediction is that Buffett may be shifting out of his CEO role, but he's not done investing. Let's take a closer look at what may be ahead.
Buffett's investing strategy
First, it's important to consider this investing expert's general investing strategy. Buffett has always been on the lookout for opportunities, which come in the form of quality companies trading for reasonable or even bargain prices. He won't follow market trends or avoid or rush into stocks because everyone else is doing so. Instead, Buffett considers each potential investment on a case-by-case basis and focuses on that particular investment's long-term prospects.
He also won't commit to a company with the idea of selling it a few months later; instead, he aims to hold on for years. He's been known to say Berkshire Hathaway's ideal holding period is "forever."
While that may be an exaggeration, Buffett has proved his point by hanging on to many of his top positions for the long haul. For example, he's owned shares of Coca-Cola since the late 1980s.
In recent quarters, though, Buffett clearly hasn't seen an overwhelming number of buying opportunities. As mentioned, he's been a net seller of stocks and even closed out positions in two S&P 500 index funds, the SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF, as of the end of last year. In his 2024 letter to shareholders, Buffett wrote, "Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities." Considering Buffett's investment activity over the past couple of years, he obviously hasn't seen a huge number of opportunities.
Preserving the cash stockpile?
Still, Buffett is unlikely to turn his back on potential investments over the coming months just to preserve the cash stockpile for Abel. During the Berkshire Hathaway shareholder meeting, he joked about this, saying, "I wouldn't do anything nearly so noble as to withhold investing myself just so that Greg could look good later on."
This shows Buffett's legendary good sense of humor, and it's true that Buffett even said (seriously this time) that he doesn't expect a major investment opportunity to suddenly pop up tomorrow. But this doesn't mean the Oracle of Omaha has stopped investing. My prediction is that if Buffett sees stocks -- current holdings or players not yet in his portfolio -- that look like interesting buys in the coming months, he will deploy some of that record cash stockpile.
Buffett's longtime preference for equities
Of course, this likely won't make an enormous dent in cash levels, offering Abel a solid start as CEO. At the same time, any potential purchases Buffett may make would be at great prices so that the investment is well positioned to gain in value over time. Considering recent declines in stocks across industries, resulting in lower valuations for many players, Buffett could soon find a bargain he's unable to resist.
The S&P 500 Shiller CAPE (cyclically-adjusted price-to-earnings) ratio, a measure of stock prices and earnings over a 10-year period to allow for economic shifts, recently fell to 33, its lowest in about a year. The measure is still trading within a historically high range, but certain individual stocks have reached bargain levels.
S&P 500 Shiller CAPE Ratio data by YCharts. CAPE Ratio = cyclically-adjusted price-to-earnings ratio.
Buffett has been a champion of American equities throughout his investing career and emphasized, even in his recent shareholder letter, that his preference for this asset class won't change. So, we could imagine Buffett won't hold off on buying a stock just because he has only several months left on the job, especially since he will remain involved as chairman of Berkshire Hathaway.
That's why I predict that, though Buffett will soon hand over the reins to Abel, this stock market legend will keep investing, offering Buffett followers more inspiration in the coming months.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
