Does Warren Buffett Know Something That We Don’t?

When the world’s most-followed investor doesn’t feel comfortable investing, should the rest of us be worried?

Warren Buffett , who has quipped that his favourite holding period for a stock is “forever,” continues to have substantial money at work in American companies. But he has never taken this much off the table either—a whopping $325 billion in cash and equivalents, mostly in the form of Treasury bills.

To appreciate the immensity of that hoard, consider that it would allow Berkshire to write a check, with change left over, for all but the 25 or so most-valuable listed U.S. corporations—iconic ones such as Walt Disney, Goldman Sachs , Pfizer, General Electric or AT&T. In addition to letting the dividends and interest pile up on its balance sheet, the conglomerate has aggressively sold down two of its largest shareholdings, Apple and Bank of America, in the past several months. And, for the first time in six years, it has stopped buying more of the stock it knows best— Berkshire Hathaway.

Does that mean mere investing mortals should be cautious about the market? Maybe, but it tells us even more about Berkshire.

Buffett and his late business partner Charlie Munger didn’t outperform the stock market 140-fold by being market-timers. Probably Munger’s most famous quote is his first rule of compounding: “Never interrupt it unnecessarily.” Investors who follow Berkshire closely and hope for a bit of its magic to rub off on their portfolios pay very close attention to what it is buying and selling, but much less to when.

Yet the seemingly always optimistic and patient Buffett has turned cautious before, famously shutting his extremely successful partnership in 1969 when he said markets were too frothy and also building up substantial cash in the years leading up to the global financial crisis—money he deployed opportunistically.

“He’s cognisant of the fact that markets gyrate and go to extremes,” says Adam J. Mead, a New Hampshire money manager and Buffetologist who is the author of “The Complete Financial History of Berkshire Hathaway.”

Stock values being stretched doesn’t mean they are on the precipice of a crash or even a bear market. Instead, zoom out and look at what today’s valuations say about returns over the next several years, which will include both good and bad periods. Goldman Sachs strategist David Kostin predicted recently that the S&P 500’s return over the next decade would average just 3% a year—less than a third of the postwar pace.

Kostin’s report went over like a record scratch at a time of high investor optimism, but it is consistent with other forecasts. Giant asset manager Vanguard recently predicted an annual return range of 3% to 5% for large U.S. stocks and just 0.1% to 2.1% for growth stocks over a decade. And Prof. Robert Shiller ’s cyclically adjusted price-to-earnings ratio is consistent with an average return of about 0.5% a year after inflation —similar to Kostin’s projection.

Then there is the even simpler “Buffett Indicator,” which the Oracle of Omaha once called “probably the best single measure of where valuations stand at any given moment.” There are variants on the theme, but it is basically a ratio of all listed stocks to the size of the U.S. economy. Taking the Wilshire 5000 Index as a proxy it is now around 200%, which would leave it more stretched than at the peak of the tech bubble.

With T-bills now yielding more than the prospective return on stocks, it might seem that Buffett has taken as many chips off of the table as possible since there is no upside in risky stocks. But he is on record saying that he would love to spend it.

“What we’d really like to do is buy great businesses,” he said at Berkshire’s 2023 annual meeting. “If we could buy a company for $50 billion or $75 billion, $100 billion, we could do it.”

With Berkshire now worth $1 trillion, it would take a deal of that size to move the needle. Mead explains that a transaction matching acquisitions like 2010’s Burlington Northern Santa Fe deal or the 1998 acquisition of insurer General Re would be worth $100 billion scaled to today’s balance sheet.

Could it also mean that Buffett sees value in keeping dry powder ahead of the next crisis or general froth in the market? Yes, but he isn’t saying, and individual investors also have more options than he does. First of all, we don’t have to pay a 20% or more premium to the market price to invest in a business like Berkshire would in a takeover. We also can sail in much shallower waters and smaller ponds. For example, Vanguard’s 10-year projections range from 7% to 9% a year for non-U.S. developed market stocks and 5% to 7% for U.S. small capitalisation stocks. Other than a very profitable bet on Japanese trading companies in recent years, though, Buffett has kept his money mostly stateside and likely will continue to do so.

Changes at Berkshire are inevitable, though—and not just because the 94-year-old is nearing the end of his remarkable career. Buffett hasn’t hesitated to return cash to shareholders, almost exclusively through stock buybacks, yet he clearly deems even his own stock too pricey for that.

Berkshire also has reached a size at which it can’t replicate its long-run record of deploying its profits and handily beating the market. It is going to have to hand money back somehow—probably through a dividend, reckons Mead. Eventually it becomes necessary to interrupt compounding.

Reporting season has once again reminded investors that a strong profit does not guarantee a rising share price, and a large loss does not always trigger a sell-off. What matters most is how each result compares with expectations and, increasingly, what management says about the year ahead. During the August 2026 season, companies offering credible turnarounds or unexpectedly strong guidance were rewarded handsomely, while those flagging weaker margins, slowing demand or greater uncertainty were punished.

The following ranking draws on Morningstar’s review of 164 ASX-listed companies and measures each company’s share-price movement on the day it reported. This captures the market’s immediate response to the earnings announcement, before subsequent economic developments, dividends and company-specific news cloud the picture. Here are the five biggest winners, and the five hardest-hit losers, of the season so far.

The five winners

1. Bapcor (ASX:BAP): +41.0%

Bapcor delivered reporting season’s largest relief rally after presenting early evidence that its troubled automotive-parts business was stabilising. Although underlying revenue fell 1.8% to $1.92 billion and underlying NPAT collapsed 85% to $10.8 million, underlying EBITDA of $152.5 million exceeded guidance.

More importantly, working-capital initiatives released $68.5 million in the second half, lifting cash conversion to 109.4% and reducing net debt by 63% to $135 million. The statutory loss was $431.6 million, largely because of non-cash impairments. Investors focused on improving operational momentum, stronger liquidity and management’s expectation of modest FY27 revenue growth.

2. Zip Co (ASX:ZIP): +18.2%

Zip comfortably surpassed its FY26 targets, sending the buy-now-pay-later provider’s shares sharply higher. Transaction volume rose 23% to $16.7 billion, while cash earnings before tax, depreciation and amortisation jumped 58% to a record $268.9 million. Statutory profit climbed 46% to $116.4 million, and the cash operating margin expanded by 4.2 percentage points to 20%.

The strongest signal was guidance for FY27 cash earnings of $340 million—around 26% growth and above analysts’ forecasts. US transaction volume increased 42.5% and now represents three-quarters of group volume, offsetting weaker customer activity in Australia.

3. CSL (ASX:CSL): +17.3%

CSL’s result was hardly spectacular in isolation, but it cleared a market bar that had fallen dramatically following earlier downgrades and restructuring announcements. Underlying NPATA was US$3.1 billion, down 2% in constant-currency terms, while operating cash flow reached US$3.51 billion.

CSL maintained its full-year dividend at US$2.92 per share and completed a A$1 billion buyback. The real catalyst was FY27 guidance for approximately 5% underlying profit growth, compared with market expectations closer to 2%. After an extended period of earnings disappointments, investors interpreted the outlook as evidence that CSL’s core plasma business was approaching a sustainable recovery.

4. Judo Capital (ASX:JDO): +16.9%

Judo Capital demonstrated strong operating leverage as its specialist business-lending franchise expanded. Full-year profit before tax rose 34% to $168.1 million, while pre-provision profit increased 42%. Gross loans and advances grew 18% to $14.7 billion, reaching the top of the bank’s guidance range and comfortably exceeding broader system growth.

Deposits increased 24% to $12.2 billion, return on equity improved by 1.1 percentage points to 6.4%, and earnings per share rose 29% to 9.9 cents. Reaffirmation of the FY27 outlook gave investors confidence that loan growth could continue without sacrificing margins or credit quality.

5. Super Retail Group (ASX:SUL): +15.8%

The owner of Supercheap Auto, rebel, BCF and Macpac reported record sales of $4.2 billion, up 3.2%, despite cautious discretionary spending. Profitability went backwards: normalised profit before tax fell 7% to $306 million and normalised NPAT declined 2.8% to $226 million as transformation spending weighed on margins. Nevertheless, the result exceeded subdued expectations, online sales grew 5.3% and membership across the group’s loyalty programs reached 13.1 million. Investors were also encouraged by positive early FY27 trading, stable gross margins and continued market-share gains. A fully franked 33-cent final dividend added to the appeal.

The five losers

1. Hansen Technologies (ASX:HSN): –21.2%

Hansen’s historic result met expectations, but investors recoiled from its outlook. The utility and communications software provider achieved an underlying EBITDA margin of 31%, exceeding its 30% target, while generating strong cash flow. However, management designated FY27 an “investment and transition year”, signalling a roughly five-percentage-point margin contraction as spending on products, sales capabilities and organisational changes increased.

Revenue had already been broadly flat, leaving investors concerned that the investment program would depress earnings before new growth appeared. Leadership changes, including the chief executive’s departure, added uncertainty. Management expects revenue growth and margins above 30% to return in FY28, but the market was unwilling to wait.

2. Life360 (ASX:360): –19.4%

Life360’s headline growth was impressive: quarterly revenue rose 38% to US$159 million, subscription revenue increased 31%, and adjusted EBITDA climbed 53% to US$31.1 million. Monthly active users reached 102.4 million and paying circles grew 27% to 3.2 million. The sell-off reflected expectations rather than a collapsing business.

Net income fell 18%, the net margin contracted from 6% to 3%, hardware shipments dropped 18%, and full-year EBITDA guidance was merely maintained. After a strong valuation run, investors wanted a larger upgrade and clearer evidence that heavy investment in advertising, international expansion and artificial intelligence would generate additional earnings.

3. PEXA Group (ASX:PXA): –17.0%

PEXA reported a 7% increase in continuing-operations revenue and 12% EBITDA growth to $152 million, accompanied by a two-percentage-point margin expansion. Free cash flow increased 39%, suggesting the core Australian electronic-conveyancing platform remained highly profitable. Investors instead concentrated on management’s warning that property-transfer volumes could decline, alongside regulatory uncertainty surrounding the fees PEXA can charge.

The company is also continuing to invest heavily in its loss-making international expansion. Morningstar considered the market reaction excessive, arguing that structural transfer-volume assumptions had not materially changed, but the combination of softer near-term activity and regulatory risk overwhelmed the respectable headline numbers.

4. SEEK (ASX:SEK): –14.3%

SEEK produced solid FY26 figures, including 10% revenue growth to $1.20 billion, a 15% rise in EBITDA and 28% growth in adjusted earnings per share. It also lifted its fully franked annual dividend by 13% to a record 52 cents. Those achievements were overshadowed by falling paid job-ad volumes and cautious FY27 assumptions.

The statutory accounts included a $201 million loss from the SEEK Growth Fund and $377 million of significant items, making the headline result considerably less attractive. Investors were particularly concerned that economic weakness could limit volumes while the company continued investing in platform integration and artificial-intelligence products.

5. JB Hi-Fi (ASX:JBH): –12.3%

JB Hi-Fi’s full-year result was broadly respectable, with group sales rising 5% to $11.1 billion and underlying earnings per share increasing 6% to $4.48. The damage came from its current-trading update. Australian sales were almost flat during the June quarter and deteriorated further in July, while earnings in the core Australian electronics business fell 3.6%.

Housing-related categories were particularly weak as higher living costs and interest rates constrained household budgets. With JB Hi-Fi entering the season on a demanding valuation, an in-line historic result was not sufficient: the loss of sales momentum prompted investors to rapidly reduce their expectations for FY27.

Overall, the season showed that share prices react less to whether profits rose or fell than to the gap between results and expectations. Bapcor was rewarded for being less troubled than feared, while several fundamentally profitable companies were punished because their outlooks failed to justify elevated valuations.