The #1 stock to buy BEFORE the June S-1 filing (From Behind the Markets)

On May 2, Berkshire Hathaway (NYSE: BRK.B) shareholders attended the first shareholder meeting without Warren Buffett presiding. Buffett announced his retirement in 2025 and appointed Greg Abel as the company’s new chief executive officer.

If investors were expecting fireworks, they were disappointed. For at least the current quarter, it’s more of the same. That includes Berkshire’s focus on raising cash, which has now grown to over $397 billion, up from $373 billion at the end of 2025.

If the stock market is a voting machine, then the fact that Berkshire Hathaway is sitting on a record pile of cash could be seen as a vote of no confidence. But there are several reasons why the company could be keeping a record amount of dry powder on hand.

3 Reasons Why Berkshire May Want to Hold Cash

Warren Buffett is known for his focus on valuation. That’s unlikely to stop being a value held at Berkshire even as Buffett steps away. So, it makes sense that the company would start to hoard cash in 2025.

Stocks are objectively expensive. The average price-to-earnings (P/E) ratio of the S&P 500 as of May 4 is a robust 27.5x, well above its rolling 10-year average of around 20x.

There’s also some thinking that Berkshire was moving to cash in anticipation of a market correction. That’s worth considering only because the company’s move to cash began in 2024. That was a time of heightened uncertainty in a presidential election year and opaque economic data.

However, the market has had two strong years in 2024 and 2025, so that argument seems less likely. After all, Berkshire was an aggressive buyer in 2022, when its cash pile dwindled to around $105 billion.

A third popular theory is that Buffett knew he was retiring and wanted to leave Abel with the flexibility to make his own decisions. Buffett was in attendance at the shareholder meeting and reiterated his confidence in Abel. However, it will likely take a few quarters to see how Abel may want to craft his own legacy.

From Sidelines to Spotlight: How Berkshire Might Deploy Its Cash

With BRK.B down about 13% in the last 12 months, it stands to reason that shareholders would like to see some of that cash put to work. After all, the criticism about a record cash pile is that it could be used for something useful.

But how could Berkshire consider deploying that cash? Looking at the current composition of the Berkshire portfolio could hold some clues.

One area to look for would be energy stocks. The energy sector makes up about 11% of Berkshire’s portfolio. That’s worthy of fourth place in terms of weighting, but it’s far below the 42% of financial stocks that carry the most weight. Berkshire currently owns Chevron Corp. (NYSE: CVX) and Occidental Petroleum (NYSE: OXY). Adding to these positions on any dip could make sense.

It would also be intriguing to see if Berkshire invests in more service-related companies that offer more attractive valuations. Many of these stocks also pay attractive dividends, which are a key part of the Berkshire strategy.

A contrarian view might be technology. Berkshire is known for having Apple Inc. (NASDAQ: AAPL) as its largest holding. However, investors know that Buffett was famously slow to embrace tech stocks beyond Apple. For example, in 2024, the company sold $133 billion in tech stocks while making less than $6 billion in new purchases.

However, with roughly 23% of the portfolio in technology, almost entirely through Apple, even a modest diversification into other tech names wouldn't represent a dramatic shift in strategy.

What may be more likely is that the company will build on its strongest position further. As has been the case since its founding, financial stocks carry the most weight in Berkshire’s portfolio. After Apple, the two stocks with the next highest weighting are American Express (NYSE: AXP) and Bank of America (NYSE: BAC).

A speculative wild card could come from basic materials stocks. Berkshire has historically approached this sector with a long-term value-oriented strategy.

This isn’t a suggestion that Berkshire will contradict Buffett’s aversion to owning gold. But the commodity super cycle is real, and that could mean Berkshire will increase its exposure to companies that fit its investment philosophy, which targets companies with low-cost production advantages and resilient demand.

The Waiting Game Continues

Berkshire's record cash hoard reflects both discipline and transition. Whether Abel chooses to deploy capital aggressively or maintain Buffett's patient approach remains to be seen.

What's more clear is that the company has enormous flexibility heading into an uncertain market. Investors willing to trust the process may find that Berkshire's caution today sets the stage for outsized returns tomorrow or whenever the right opportunity finally arrives.

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