Warren Buffett pointed to an important difference between himself and Wall Street in his last letter to shareholders of Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B). He noted that he does not use any income before interest, taxes, depreciation and amortization (EBITDA), referring to the financial metric as ‘a lack of favorite of Wall Street’.
This diverse look at EBITDA reflects exactly the tip of the iceberg of what can be described as diametral different perspectives. Does Buffett know something that Wall Street does not do? The answer is as clear as day.
Image source: The Motley Fool.
Until recently, Wall Street seemed downright dizzy. The S&P 500 Steared 28.5% between January 1, 2024 and 18 February 2025. However, the index has since fallen by 7% compared to its peak.
Why? The biggest reason is that investors are concerned about the negative impact of the proposed rates of the Trump government.
The interesting thing about all this is that President Donald does Trump (or at least takes the first steps) exactly what he said he would do if he ran for a second presidential term. Trump promised rates; Now he is moving to implement them.
However, every hint of a postponement of raising rates brings a sigh of relief from Wall Street. You could say that the market is in a “hope/worries” cycle.
In the meantime, most analysts still recommend buying the shares that the Bullmarkt have led or something in recent years. For example 58 out of 63 analysts investigated by LSEG in March Nvidia As a purchase or a strong purchase, whereby the from bijters recommend to hold the stock.
This optimism is not limited to Nvidia. Wall Street, however, generally remains positive despite a stock market that is appreciated at historically high levels. Take a look at the Shiller S&P 500 Cape Ratio. Despite a decrease in the past few weeks, the valuation meter is still close to the second highest level ever.
S&P 500 Shiller Cape Ratio Data from Ycharts.
Buffett has not been as bullish as Wall Street. This is apparent from his actions while the stock market rose.
Firstly, the multibillionary investor has been a net seller of shares for nine consecutive quarters. Of course, the “Oracle of Omaha” kept buying a few shares. However, he does not find much for his will these days.
In the fourth quarter of 2024, Buffett did not even allow the stock buying of Berkshire Hathaway. That is striking, given that Berkshire has purchased at least some of his shares in every previous quarter in the past five years.
Wat Buffett has However, doing is building enormous money supply. He tried to play down this in his recent letter to the shareholders of Berkshire Hathaway and stated: “Despite what some commentators are currently considering an extraordinary cash position in Berkshire, the large majority of your money remains in shares.”
That’s true. However, it is also true that Berkshire’s cash position of $ 334.2 billion is Extraordinary (as the next graph shows).
BRK.A Contant and short Terme Investmingen (quarterly) data from YCHARTS.
Does Buffett know something that Wall Street does not do? Yes. And I think it can be summarized by one of his most famous statements: “We just try to be afraid when others are greedy and only be greedy if others are anxious.”
Buffett understands that the best times to buy shares are when they are for sale. He clearly did not think that this is the case for a while, although analysts continued to encourage investors to buy shares that hand over the fist.
Perhaps the most important thing is that Buffett knows that Wall Street is apparently not, the importance is to concentrate in the long term. I doubt he is worried about the impact of rates because he expects them to be temporary. As Buffett recently wrote to the shareholders of Berkshire about the shares that the conglomerate has:
After a while we think it will be very likely that profits will prevail – why should we buy these effects differently? -Although the figures will swing wild and unpredictable from the year to year. Our horizon for such obligations is almost always much longer than a year. In many our thinking includes decades. These long term are the purchases that the cash register sometimes ring like church bells.
You will not hear many or no people in Wall Street who make that kind of explanation. But Buffett’s long -term perspective is the main reason why he has been so successful. The difference in his prospects versus Wall Street is really as clear as day.
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Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions and recommends Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy.
Does Warren Buffett know something that Wall Street does not do? The answer is as clear as day. was originally published by the Motley Fool
