Warren Buffett Thinks Stocks Are Expensive. Berkshire Hathaway CEO Greg Abel Seems To Disagree

Berkshire Hathaway reported a shift in positioning under Greg Abel, adding about $17 billion to a large Alphabet position in the second quarter and also buying Delta ($1.64B), Lennar ($273M), and Macy’s ($101M). The company simultaneously reduced financial exposure, cutting Bank of America by $1.7B and selling Capital One by $830M, while it still held a substantial liquidity buffer of $373.3B (cash/cash equivalents/T-bills). Overall, the news is more about strategy and sentiment (value-to-cyclical tilt amid an “overvalued market” view) than any immediate earnings or policy shock.

Analysis

The cleanest takeaway is not that Berkshire endorsed a new macro regime; it’s that a capital allocator with a very low cost of capital is still finding incremental value in a few liquid megacaps while avoiding banks. That matters most for GOOGL: the read-through is that the market may be underpricing durable free-cash-flow quality and overdiscounting antitrust as a permanent earnings cap, especially if cloud and AI monetization keep compounding faster than capex.

The bigger second-order effect is on financials and consumer-credit exposure. Continued trimming of BAC and COF suggests less enthusiasm for balance-sheet intensity when risk-free cash still pays, which can keep multiples compressed even if credit metrics don’t deteriorate. For DAL and LEN, the signal is more cyclical beta than fundamental conviction: they work if the soft landing persists, but they will be among the first to de-rate if traffic or housing data roll over.

Contrarian view: the market may be over-reading a single quarter and underestimating how much of this is balance-sheet optionality rather than thesis change. The real catalyst is the next 1-2 filings: if Berkshire keeps buying equities, that is a regime shift; if it reverts to net selling, this will look like noise. Falsifiers for the bullish GOOGL read-through are cloud growth deceleration, a sharper DOJ remedy path, or evidence that the purchase was strictly idiosyncratic rather than a broad re-rating call.

Key Decisions for Investors

• Long GOOGL on 1-3 month weakness; the setup is favorable if the market starts valuing FCF durability over antitrust headlines. Use call spreads rather than outright calls if you want convexity without paying full premium; thesis breaks if cloud growth or AI monetization slows into earnings.
• Trim or underweight BAC and COF on a 1-3 month horizon versus quality financials elsewhere; Berkshire’s rotation is not a smoking gun, but it reinforces a lower-multiple ceiling for consumer-credit and rate-sensitive banks. Falsifier: sustained NII stabilization and no deterioration in charge-offs/consumer delinquencies.
• Treat DAL as a relative long only, not a standalone catalyst trade; it can outperform if travel demand stays firm, but it is vulnerable to any macro hiccup. Best expression is a tactical long into a benign CPI/jobs tape, with a hard stop if domestic booking data soften.
• Do not chase BRK.B as a 'Buffett premium' re-rating trade; the stock’s upside depends on capital deployment cadence, not one quarter of activity. Set an alert for the next 13F: continued net buying would justify revisiting a long, while renewed selling would argue for fading the narrative.
• Watch LEN for a delayed-cycle housing rebound rather than immediate momentum; this is a 6-18 month optionality trade, not a near-term earnings catalyst. Consider only if mortgage rates trend lower and orders improve.