London Daily

Focus on the big picture.
Saturday, May 31, 2025

Warren Buffett is sitting on $128 billion, raising questions about whether the market is overvalued

Warren Buffett is sitting on $128 billion, raising questions about whether the market is overvalued

Buffett's decision to walk away from a deal despite Berkshire's massive cash hoard may show there aren't that many reasonably priced opportunities.

The forward price-to-earnings ratio for the S&P 500 has climbed to levels last seen around December’s monster sell-off.

The S&P 500 is also trading at about 2.14 times sales estimates for the next 12 months.

The last time the market reached such a high price-sales multiple was in September 2018 when a big sell-off began and in the first quarter of 2000 just before the tech bubble burst.

Despite having $128 billion to burn, Warren Buffett just backed out of a bidding war after a slightly higher offer topped Berkshire Hathaway’s.

If the Oracle of Omaha is that shy to just spend a tad more of his giant cash pile, could that be saying something about the stock market’s overall valuation?

Last week, the Berkshire chairman and CEO bid $140 a share, or just over $5 billion, for Tech Data, a hot technology distributor, according to an exclusive report Friday from CNBC’s Becky Quick. Then private-equity giant Apollo Global Management then sweetened its initial bid to $145 a share, or $5.14 billion.


Buffett then bowed out.

Little is cheap in the market right now as stocks’ record run this year has driven multiples higher across the board and lifted most stocks.

“Prices are sky-high for businesses possessing decent long-term prospects,” Buffett said in the most recent annual letter. He has repeatedly said the premium for buying companies outright has gotten too rich for his liking partly due to competition from private-equity companies.

The S&P 500 is up 25% this year, on pace for its best annual performance since 2013. An impressive rally this quarter has pushed stocks to all-time highs amid optimism on a U.S.-China trade deal and receding fears of recession.


‘Almost unprecedented’

The forward price-to-earnings ratio for the S&P 500, the most common indicator for market valuation that measures current share price relative to per-share earnings estimates for the next 12 months, has climbed to levels last seen around December’s monster sell-off.

“U.S. equities remain highly overvalued relative to non-U.S. equities,” Lori Calvasina, head of U.S. equity strategy at RBC, said in a note Wednesday. “We aren’t looking for much multiple expansion in 2020.”

The S&P 500 is also trading at about 2.14 times sales estimates for the next 12 months. The only times the market reached such multiple was September 2018 when the sell-off began and in the first quarter of 2000 just before the tech bubble burst.

It is “not unprecedented but almost unprecedented,” Patrick Armstrong, chief investment officer at Plurimi Investments, said on CNBC’s “Worldwide Exchange” on Friday. “A multiple doesn’t cause a sell-off, but the more expanded a multiple gets the bigger drawdown happens with the sell-off.”

The elevated valuation is especially prevalent in tech as the P/E ratio for the sector has rebounded to the highest levels of the past 10 years, according to Bespoke Investment Group.

It begs the question, if Buffett isn’t willing to pay a premium, should you?

Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×