Warren Buffett's selling stocks like Apple as he sees trouble ahead — but he'll spend if markets crash: elite strategist

Buffett sold $17 billion of stocks and amassed a record $189 billion cash pile last quarter because he knows the fun won't last, Paul Dietrich said.

• Warren Buffett is selling stocks because he's getting out at the market high, Paul Dietrich told BI.
• The Berkshire Hathaway CEO will pile back in once a crash or recession hits, the strategist said.
• Berkshire cashed in stocks like Apple last quarter, raising its cash pile to a record $189 billion.

Warren Buffett is cashing in stocks like Apple because he knows the good times won't last — but he'll spend big once disaster strikes, a veteran strategist says.

"He is selling out of one of the most overvalued stock markets in history at the 'high' and once there is a serious correction or recession, I am sure he will, as he always does, start redeploying those assets back into the market at much lower prices," Paul Dietrich told Business Insider.

B. Riley Wealth Management's chief investment strategist was referring to Buffett's Berkshire Hathaway selling more than $17 billion of stocks on a net basis last quarter — its biggest three-month disposal in years.

Berkshire offloaded 13% of its monster stake in Apple, which accounted for virtually all the sales.

The conglomerate's disposals fueled a $21 billion increase in its stack of cash and Treasurys to a record $189 billion. Buffett predicted the money mountain would exceed $200 billion by the end of June.

The famed investor sees no problem holding that much cash given the backdrop, he said during Berkshire's annual shareholder meeting on May 4: "When I look at the alternative of what's available, in the equity markets, and I look at the composition of what's going on in the world, we find it quite attractive."

Dietrich told BI that he's been a Berkshire investor for more than 30 years, most of his client portfolios contain Berkshire stock. He's also read all of Buffett's annual reports and many articles and books about him.

Dietrich underscored that as a value investor, Buffett prizes underpriced assets and avoids expensive ones.

"He is doing what he always tells other investors to do," he said. "It is the advice your grandmother gave you as a little boy: 'Buy low and sell high.'"

"You don't need to be a brain surgeon to know the last few months were the right time to sell out of the stock market and get out at the 'high'."

High prices and other sellers

The benchmark S&P 500 stock index has surged by 26% in the past 12 months, and 73% since the start of 2020, to trade at a record level. Apple, which remains Buffett's largest stock holding by far, has more than tripled in value since he finished building the position in 2018.

Dietrich pointed out that several of the world's wealthiest stockholders — including Amazon's Jeff Bezos, JPMorgan's Jamie Dimon, Meta's Mark Zuckerberg, and the heirs to the Walmart fortune — have sold shares in their companies in recent months, signaling they believe it's a good time to cash out.

Buffett may be getting out while the going's good, but he'll be ready to pile back in when everyone else is fleeing, Dietrich said.

The investor has repeatedly underscored the value of a huge cash reserve, not just to weather tough times but also to strike deals on attractive terms and scoop up cut-price assets during downturns.

Buffett famously struck lucrative deals with a raft of companies during the Great Recession including Goldman Sachs, General Electric, Mars, Harley-Davidson, and Dow Chemical.

It's worth noting that Dietrich has been warning about a devastating downturn for a while, yet the stock market and economy have defied his and other commentators' dire forecasts for years now.