Something Doesn’t Add Up…
Warren Buffett has spent a lifetime looking for bargains.
And right now, the stock market is presenting a rather strange puzzle.
By one of his most famous valuation measures, American stocks have never looked more expensive.
By another widely followed measure, they haven’t looked this cheap in at least three decades.
Same market. Opposite conclusions.
Meanwhile, there’s another interesting development inside Berkshire Hathaway.
A little-known $863 million investment portfolio has been making some notable changes.
Two of Wall Street’s biggest technology names were on the chopping block.
And more than $149 million of that portfolio is invested in two rather ordinary S&P 500 index funds.
But here’s another twist.
While Buffett’s famous valuation gauge is sitting at a record high, Berkshire itself has recently returned to buying stocks.
So what do you make of a market that looks historically expensive, unusually cheap, and still has Berkshire buying?
Let’s find out. ⇩
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Buffett’s $863 Million Secret…
Most investors know about Berkshire Hathaway’s enormous stock portfolio.
Apple. American Express. Coca-Cola…
But there’s another portfolio inside Berkshire that receives considerably less attention.
And its latest moves are worth a look.
The story begins in 1998, when Berkshire acquired reinsurance giant General Re for approximately $22 billion.
Along with the insurance business came a smaller investment firm called New England Asset Management, or NEAM.
Nearly three decades later, that subsidiary manages a stock portfolio worth roughly $863 million.
And during the second quarter of 2026, it made two particularly notable reductions.
→ Broadcom AVGO ( ▲ 0.39% ) : Sold 97% of its position, which previously held 6,605 shares.
→ Alphabet GOOGL ( ▲ 0.97% )  : Sold 48% of its Class A shares.
One nearly eliminated. The other almost cut in half.
Both companies have been prominent beneficiaries of the artificial intelligence boom, although the filing doesn’t tell us why NEAM reduced its holdings.
Profit-taking is one possibility. A change in portfolio priorities is another.
The reductions are interesting.
Particularly when you look at what else sits inside this lesser-known portfolio.
âś± And it’s considerably less exciting than Alphabet or Broadcom. ↓
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Buffett’s $863 Million Secret…
For a portfolio that’s been trimming some of the biggest names in tech, NEAM has a surprisingly ordinary investment worth talking about.
Actually, two of them.
S&P 500 index funds.
→ $76.1 million in SPDR S&P 500 ETF Trust SPY ( ▲ 0.6% ) .
→ $73.2 million in Vanguard S&P 500 ETF VOO ( ▲ 0.61% ) .
That’s $149.3 million, or roughly 17.3% of the entire $863 million portfolio.
Both funds essentially own the same 500 companies.
SPY and VOO track the S&P 500, offering nearly identical exposure to America’s largest publicly traded businesses.
Pretty much the same basket.
It’s also a familiar page from Buffett’s playbook.
The investor who became famous for picking individual stocks has spent decades arguing that most people would be better served by a low-cost S&P 500 index fund.
!!! Quite the endorsement from one of history’s most successful stock pickers.
Now, there’s an important caveat.
âś± NEAM’s reported holdings don’t establish whether those index positions increased during the quarter, or whether the proceeds from its Alphabet and Broadcom sales went into them.
What we do know is that nearly one-fifth of this Berkshire-owned portfolio sits in two funds tracking the broader U.S. stock market.
Which brings us to a rather awkward question.
Just how expensive is that market right now?
Depending on which valuation metric you use, the answer changes dramatically.↓
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Take a look at this chart:
That’s the Buffett Indicator — the value of the entire stock market measured against U.S. GDP.
Warren Buffett called it “probably the best single measure” of where valuations stand.
“Playing with fire” — that’s what he called readings near 200% back in the dot-com era.
Today it’s higher than 1999. Higher than 2021. Near the highest level ever recorded.
At his final shareholder meeting, Buffett said people have never been “in a more gambling mood” than now.
His firm is sitting on a record $397 billion in cash.
So is a crash coming? That’s the wrong question.
My name is Alexander Green. In 40 years as a professional investor, I’ve learned that charts like this never tell you WHEN. But there’s a pattern that does.
Buffett’s Indicator Breaks the Scale…
Warren Buffett once called it “probably the best single measure” of stock market valuations.
Today, that measure is giving investors quite a number to digest.
Meet the Buffett Indicator.
It compares the total value of U.S. stocks with the country’s gross domestic product (GDP) — essentially, the size of its economy.
The higher the ratio, the more investors are paying for stocks relative to economic output.
And right now, it’s setting records.
→ 172% at the peak of the dot-com bubble.
→ Above 235% in October 2026.
That’s a gap of more than 63 percentage points.
For perspective, readings above 120% have traditionally been considered expensive.
We’re now nearly double that threshold.
And Buffett’s indicator has company.
→ The Shiller CAPE ratio, which compares stock prices with ten years of inflation-adjusted earnings, has climbed above 40×.
According to the supplied analysis, the only other time it reached that territory was during the dot-com boom.
But… neither indicator tells investors when the market might turn.
And another widely followed measure suggests stocks might actually be unusually cheap.
Yes, cheap.↓
Wait. Stocks Are Cheap?
While Buffett’s famous indicator is flashing its most expensive reading on record, Berkshire Hathaway has been doing something rather unexpected.
!!! Buying stocks.
According to The Motley Fool, Berkshire recently became a net buyer of equities for the first time in 3.5 years.
That means it purchased more stocks than it sold during the quarter.
And the buying didn’t stop there.
→ Stock purchases: Berkshire returned to net buying after years of selling more than it bought.
→ Share buybacks: The company also resumed repurchasing its own shares after a lengthy pause.
An interesting development for a company whose namesake valuation indicator is sitting above 235%.
Of course, this doesn’t mean Buffett suddenly considers the entire market cheap. Berkshire can find individual opportunities even when broader valuations look elevated.
And there’s an important distinction: these are Berkshire’s company-wide activities, separate from the Alphabet and Broadcom reductions made by NEAM’s investment team.
A record-high Buffett Indicator. A historically low PEG ratio. And Berkshire buying stocks again.
Quite the mixed message.
One measure says stocks are expensive. Another says they’re cheap. Meanwhile, Berkshire is back in the market.
So who’s right?
The answer depends on something nobody has seen yet: future earnings.
Don’t forget to cast your vote 👇
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