Warren Buffett has spent much of the past three years signaling to investors that the U.S. stock market is overheating and 2025 has been his strongest warning yet.
Berkshire Hathaway has now been a net seller of equities for 12 consecutive quarters, offloading more than $24 billion in stock through the first nine months of the year.
As a result, Berkshire’s cash hoard has surged to a record $354 billion, an unmistakable sign that Buffett sees limited value in today’s market.
Buffett’s caution is grounded in traditional valuation metrics flashing red. The “Buffett Indicator,” which compares total U.S. stock market value to GDP, is hovering near 225%, a historically extreme level.
By Buffett’s own description, investors buying stocks at these valuations are “playing with fire.” The S&P 500’s elevated price-to-earnings and CAPE ratios only reinforce the narrative: stocks have climbed faster than their fundamentals.
Yet despite his defensive stance, Buffett hasn’t stopped looking for opportunity. In fact, he has deployed roughly $14 billion into new investments in 2025 and those purchases offer a roadmap for investors trying to navigate an expensive market.
Three Big Buys and Why They Matter
Across the first three quarters of 2025, Berkshire Hathaway made $13.4 billion in equity purchases, with additional deals announced shortly after. Three investments in particular stand out:
- 17.8 million shares of Alphabet (GOOGL/GOOG)
- The $9.7 billion purchase of OxyChem, Occidental Petroleum’s chemicals division
- Increased stakes in Japanese trading giants Mitsubishi and Mitsui
At first glance, these moves seem unrelated tech, chemicals, and international conglomerates. But together they form a coherent strategy: Buffett is expanding his universe of investable assets in search of value the U.S. market no longer provides.
Why Alphabet Made the Cut
Buffett historically avoided large tech companies, but Alphabet finally checked enough boxes to win a sizable Berkshire investment.
Trading at under 20 times forward earnings, the stock looked inexpensive compared with other AI leaders and even the broader S&P 500.
With massive free cash flow and growing investments in AI infrastructure, Alphabet offered Buffett something increasingly rare in today’s market: strong fundamentals at a reasonable price.
Although many believe Berkshire’s lieutenants Ted Weschler or Todd Combs initiated the purchase, the buy nonetheless aligns with Buffett’s long-held principles of buying great businesses at fair prices.
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OxyChem: Finding Value Off the Beaten Path
Buffett’s ability to acquire entire businesses gives Berkshire access to opportunities ordinary investors can’t tap into. His $9.7 billion deal to buy OxyChem allowed him to capitalize on undervaluation in the chemicals sector – an industry trading below peer multiples.
Not only does the acquisition bring a stable, cash-generating business into the Berkshire fold, but it also strengthens Occidental Petroleum, of which Berkshire already owns 28% and holds preferred shares yielding 8%.
In other words, this was classic Buffett: securing value while improving the long-term prospects of a major investment partner.
Doubling Down in Japan
Buffett rarely ventures outside the U.S., but the Japanese trading houses have been an exception since Charlie Munger first championed them years ago.
Mitsubishi and Mitsui still offer attractive valuations even after years of price appreciation, with price-to-book ratios near 1.5, well below comparable U.S. companies.
Japan’s broader market also trades at more reasonable valuations than the U.S., making it fertile ground for value-driven investors.
Buffett’s Underlying Message for Investors
While copying Buffett trade-for-trade is risky – Berkshire’s size and access create limitations most investors don’t face – the lesson from his 2025 activity is unmistakable:
Opportunities still exist, but they may lie outside your usual comfort zone.
With U.S. large-cap stocks richly valued, investors may need to:
- Explore small-cap stocks, which currently trade at more attractive valuations
- Consider international markets, particularly Japan and Europe
- Expand their circle of competence by researching sectors or companies typically overlooked by Wall Street
These areas receive less media attention and analyst coverage, meaning investors must do more independent research but the payoff can be substantial.
Buffett’s 2025 playbook is ultimately a reminder that even in a frothy market, disciplined investing still works.
By seeking pockets of undervaluation, remaining patient, and staying open to new opportunities, investors can continue generating strong long-term returns, even when the broader market looks expensive.
