Stockwatch: how much notice should we take of Warren Buffett?

He’s the best-known and most widely followed professional investor in history, but stocks have become more expensive and economies fragile. Analyst Edmond Jackson gives his view on the 95-year-old Sage of Omaha.

4th November 2025 12:38

by Edmond Jackson from interactive investor

Warren Buffett, CEO of Berkshire Hathaway. Photo by Johannes EISELE/AFP via Getty Images.

The revelation that Berkshire Hathaway Inc Class B  BRK.B

has accumulated record cash holdings – $377.5 billion (£287.7 billion) in cash and near-term US Treasury Bills, or nearly 54% of its net assets – is eye-popping.

That’s not just a red flag about some US equity valuations but also the economy, and is key to understanding Warren Buffett’s style.

Yet his sayings can be somewhat contradictory, and it’s interesting to critically consider his key points to smaller investors.

In his annual reports and AGM conversations, a regular Buffett theme over the decades has been long-term prosperity of the US economy. There’s a sense of “trust in Uncle Sam”, explaining why he has barely diversified outside US businesses in his investment career (albeit global exposure via multinationals).

He has also advocated that smaller investors use a low-cost S&P 500 index fund as the best means to achieve satisfactory returns, and put regular sums into the market this way.

It’s akin to the “semi-strong” theory of market efficiency, which you might describe in less abstract terms as “trust market prices” – where guessing market moves is probably futile. A further implication is that doing well over the long run is achievable by owning the whole market rather than fretting over stock selection.

Yet on the grand scale of Berkshire Hathaway – one of the top 10 US companies and the first non-tech firm to break the $1 trillion valuation – does the exact opposite. Its portfolio of marketable securities is highly concentrated, its five largest holdings constituting 66% of equities at 30 September, down from 71% at the end of 2024. These are 

American Express Co  AXP

 Bank of America Corp BAC0 

Coca-Cola Co KO2.1  

Chevron Corp CVX

And Buffett seems to be trading more amid caution at valuations and possibly scope for a cyclical downturn.

Looking at Berkshire’s trend in filings this year, cyclicals such as communications have been targeted: T-Mobile US Inc  TMUS

is now eliminated and Charter Communications Inc Class A 

CHTR 0.92% 

cut 46.5% to $435 million, albeit small in portfolio context.

Most notably in terms of a macro view, the Bank of America holding has been pared down 41% since mid-2024 to $28.6 billion. Banks are usually a leading indicator of the stock market – something you ideally buy in the trough of a recession and sell after a boom.

At Berkshire’s 2024 AGM, and in relation to Apple, Buffett also cited the prospect of the peak marginal corporate income tax rate rising in future – as justification for selling down Apple (and by implication possibly Bank of America also). This to me feels like another adage-break in the sense not to put tax considerations before quality of business.

Amber lights for Apple equity

Berkshire’s Apple stake is another candidate for scrutiny. Last year it was cut by two-thirds, but in a demonstration of how the world’s shrewdest investor can still get things “wrong”, Apple has continued to advance despite the March-April slide on tariff fears:

Source: TradingView. Past performance is not a guide to future performance.

Past “bubble” periods in markets suggest this latest tech-driven one could still be early stage and last several years. Compared with valuations in 1999-2000, today’s tech giants have colossal earning power, which the rush to adopt AI is helping advance, for now anyway.

Perhaps Buffett would say we have no real idea of how long such overvaluation might last and that the long-term median valuation should be respected. Apple’s trailing price/earnings (PE) ratio is in the mid-thirties (I recall drawing attention some years ago on 12x when Apple was out of favour) and in Buffett’s investing lifetime there is a precedent of how the “Nifty 50” growth stocks de-rated and Polaroid filed for bankruptcy in 2001 after it failed to adapt.

I do not imply a parallel with Apple but note that various Chinese Android smartphone manufacturers now enjoy their devices rated equally if not better than iPhones, so if the cult of Apple users contracts over years, then, yes, the stock’s PE can mean-revert down.

Despite Apple’s market value soaring over 24% in the third quarter of 2025, it is speculated that Berkshire continued to offload, given that its latest report cites the cost basis of its consumer products equity holdings down $1.2 billion from Q2. This category is dominated by the Apple stake.

Time will tell whether Buffett’s conservatism – to protect value by locking it in – will win versus the adage to “run winners”. Yet Berkshire can only sell into strength of demand, otherwise valuation would plunge or even face illiquidity.

So, while I have been bullish about Apple in the past, and for smaller nimble investors still regard it as a “hold”, best note this Berkshire selling in a context of strong Chinese competition challenging Apple’s profit margin.  

Ultimately Buffett embraces active over passive investing

In Berkshire Hathaway’s annual reports Buffett has often said “our favourite holding period is forever”, but this may not square with the real world.

He has also often enjoyed quoting Benjamin Graham – a 20th-century dean of value investing – who used to characterise share investing as being in a partnership with “Mr Market”, an incurable manic-depressive. Sometimes he will bid/offer you extravagant prices, other times well below what the businesses could fetch in a private sale. Intelligent investors must avoid falling under his spell and be patient to do the opposite.

Such a view can still reconcile with stock market valuations being “semi-strong efficient” in the long run; for example, mean-reversion up or down. It accords with another Graham/Buffett adage about how the market is a voting machine in the short run but a weighing machine longer term.

Where does this leave Berkshire Hathaway as an investment proposition?

Over the last 30 or so years, I have encountered investors who not unreasonably believe that it is worth having a share in Berkshire’s fortune, given that Buffett is also highly attuned at acquiring private companies. Last month, for example, the petrochemicals division of Occidental Petroleum Corp  OXY

was acquired for $9.7 billion.

While the A class are the original higher-priced shares with more voting rights, the B are more affordable with significantly less voting power but identical investment performance. They have had a very good run up to $530 last May. Indeed, they are up about eight-fold since the 2008 financial crisis, although more recently appeared to drop below trend-line:  

Source: TradingView. Past performance is not a guide to future performance.

At around $475 currently, the trailing PE is 15x but there is no yield as Buffett would see paying out as a thumbs down on his capital allocation, but until this year Berkshire has periodically engaged in share buybacks.  

On the face of it, third-quarter results showing operating profit up 34% year-on-year to $13.5 billion – driven mainly by insurance, railroad and energy – implies momentum from the fully owned businesses that are strongly positioned. Insurance underwriting soared over 200% to $2.37 billion.

Yet there appear at least two cautionary stances among US brokers following Berkshire, on the grounds of Buffett’s succession risk at age 95 and also headwinds that could weigh on earnings and share performance. Vehicle insurer Geico and railroad Burlington Northern Santa Fe may face cyclical and structural challenges.

A chief risk I see is the US economy becoming two-tier: big tech and AI masking a trend towards sluggish growth elsewhere, which might resolve in due course, but maybe not if tariff-induced inflation creeps in.

Greg Abel was Buffett’s clear first choice as successor CEO and has been with Berkshire some 25 years; time enough to ingrain plenty of Buffett’s mindset.

I regard Berkshire as essentially a well-honed spread of US businesses and shares, yet the economy is in question and Buffett’s actions suggest the market is high-priced. At best, I therefore rate “hold” and would let events play out further.

Edmond Jackson is a freelance contributor and not a direct employee of interactive investor.

I’ve tried to deal AIRE but it’s restricted trading, although you can buy 3,000 shares. The problem being you could build a position but be locked in when you want to sell, so not a suitable share for the Snowball. I will look for something to buy over the weekend.

I’ve sold the shares in PHP for a profit of £333.00, mainly because PHP was bought xd and dividends are the only consideration for the Snowball.

The replacement share is going to be Alternative Income AIRE, most probably.

How big does a Stocks and Shares ISA need to be to target a £1k monthly passive income?

Christopher Ruane explains how a Stocks and Shares ISA can be used as part of a strategy to try and earn a four-figure monthly passive income.

Posted by Christopher Ruane

Published 6 November

LGEN

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Ever thought of stuffing a Stocks and Shares ISA with dividend shares as a way to earn passive income?

Lots of people do.

Such an approach can be lucrative over the long term.

It also means that passive income can hopefully be earned from proven blue-chip companies. That sounds genuinely passive to me, compared to some other approaches people use.

Setting a goal and working towards it

How much might such a plan earn?

It is a bit like asking how long is a piece of string. The amount of passive income a Stocks and Shares ISA can generate in the form of dividends depends on three factors: how much is invested, for how long, and at what dividend yield.

£1k a month equates to £12k per year. At a 5% yield, that would require an investment of £240k. At a 7% yield, it would require a bit less than £172k.

That may make it sound as if higher yields are the thing to go for. But no dividend is ever guaranteed to last, so when looking for shares to buy, it is always important to look at the likely source of any future dividends, not just the current yield.

£1k a month is a realistic target, like this

Both 5% and 7% are above the current FTSE 100 yield. But I think 7% is a realistic target in today’s market.

Not everyone has a spare £172k in their Stocks and Shares ISA that would let them get going straight away. That is fine – it is also possible to start from zero, by making regular contributions.

Putting £20k a year into the ISA and compounding at 7% annually, it would take just 7 years to hit the target size of close to £172k.

It could also be done with smaller contributions, though it would then take longer.

Finding shares to buy

One share I think investors should consider is Legal & General (LSE: LGEN). The FTSE 100 financial services firm has an 8.9% dividend yield.

It also aims to grow its dividend per share each year. The sale of a large US business ought to generate cash to help do that, though I see a risk that it could also leave a gap in the company’s profit generation ability compared to previously.

But with its strong brand, long history, large customer base, and proven cash generation ability, I think there is a lot to like about Legal & General.

Over the long term, I am hopeful it can use those strengths to keep generating more cash than it needs to run its business – and hopefully distributing lots of it as dividends.

Invesco Bond Income Plus (BIPS)

05 November 2025

Disclaimer

This is a non-independent marketing communication commissioned by Invesco. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

KEPLER

BIPS uses the investment trust structure to maximise the potential in high-yield bonds.

Overview

Invesco Bond Income Plus (BIPS) is designed to offer an attractively high yield with a diversified, risk-conscious approach. The investment trust structure allows the manager, Rhys Davies, to invest in a diversified set of high-yield bond markets, including into some smaller and less liquid areas, and to boost the yield by taking on gearing rather than extra credit risk. Meanwhile, the ability for the board to build up revenue reserves makes it easier for it to provide a smooth income output (see Dividend).

Rhys can invest in high yield globally, but focusses on the UK and Europe, supplemented by the best ideas from Invesco’s large US-based credit teams. He runs a portfolio very diversified by issuer, and uses his and his team’s expertise in subordinated bank debt to provide a boost to the yield without taking excessive credit risk (see Portfolio). Currently, this allocation to subordinated financials is balanced by a large position in lower-yielding, investment-grade debt. Overall, Rhys is positioned cautiously, waiting for opportunities to take advantage when high valuations recede — as he did to good effect during the tariff tantrum of April 2025. Nonetheless, the portfolio yield is c. 7.5%, reflecting Rhys’ ability to generate income without leaning on credit risk. Board and manager agree a dividend target at the start of each year, with 2025’s 12.25p per share equivalent to an ongoing share price yield of 7.0%.

Strong demand for the shares means the trust has tended to trade on a premium for the past three years and the board has issued substantial amounts of shares to meet demand, which has contributed to BIPS having the lowest charges in its sector by some way. Nonetheless, the shares still trade on a small premium of 1.5% at the time of writing.

Analyst’s View

BIPS has strong credentials to be the first option considered for any high-yield bond allocation. It uses the features of the investment trust structure well to its advantage, providing an edge over open-ended funds or ETFs. Rhys doesn’t have to keep cash on hand for outflows, and so can remain fully invested. In fact, he tends to run with a geared position, boosting the yield and the capital growth potential. He also invests in more specialist and less liquid areas like subordinated financial debt and some small issue bond deals, providing off-benchmark allocations that passive options can’t. The annual dividend target provides some visibility on the yield, while revenue reserves provide some protection in the event that market yields fall. Invesco’s large credit teams in Europe and the USA allow Rhys to manage a broad and diversified portfolio with prudently managed issuer and geographical risks.

Rhys’s cautious outlook doesn’t prevent the trust from offering a high yield while also having some built-in beta to any price appreciation that would come from falling interest rates, with a duration of 3.8 as of the end of September. This interest rate sensitivity is spread across the three key geographies, and so if UK rates remain high while European and US rates continue to fall, the portfolio will still benefit. We think that, given how narrow credit spreads are right now, BIPS’s approach, which allows a high yield to be earned without leaning on credit risk, is highly attractive.

Bull

• Experienced and well-resourced team with international presence
• Risk-conscious approach could provide stability through tougher markets
• Attractive yield on offer with high average credit rating

Bear

• Gearing also magnifies losses in falling markets as well as gains in rising markets
• Income would come under pressure with any sustained fall in market yields (as it would for peers)
• Duration would lead to losses if rates were hiked

City of London Investment Trust (CTY)

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by City of London Investment Trust (CTY). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

KEPLER

A strong year of stock picking puts CTY well ahead of the benchmark.

Overview

City of London Investment Trust (CTY) aims to deliver income and capital growth. Job Curtis has an impressive tenure of 34 years managing the trust, giving him a depth of experience rarely matched. In particular, the last financial year illustrated the benefits of his active, stock-picking approach. That said, this is a cautious investment strategy that is arguably well suited to extending CTY’s unrivalled 59 year run of progressive dividend increases.

Job seeks to spread risks – both in terms of capital and income generation – across the portfolio. This has protected CTY against many sector-specific issues that have arisen over the years, but also in our view complements Job’s valuation-based investment framework, which favours quality companies, and sometimes has a contrarian tilt towards identifying new ideas. Job aims to balance any lower yielders in the portfolio by also investing in steady, highly resilient dividend payers with strong balance sheets. As we highlight in the Portfolio section, this means that CTY is exposed to a range of different types of companies, with varying growth and income characteristics.

Behind the headline-grabbing Dividend Hero moniker, CTY continues to deliver on a NAV total return basis too. CTY has delivered outperformance of the benchmark over one, three, five and ten years.

CTY’s dividend represents a yield of 4.25%. Whilst the dividend increase last year of 3.4% was a shade behind that of UK CPI at 3.6%, the board has stated that it understands the importance of growing the dividend in real terms through the economic cycle and long term. CTY has delivered real dividend growth over ten and twenty years, as we discuss in the Dividend section.

Analyst’s View

CTY has established itself as the leading trust in the UK Equity Income sector, a result not only of its long history of dividend increases over the past 59 years, but also because it has delivered good total returns to shareholders too. As a result, it has won investors’ confidence over time, issuing shares and growing organically so that it now dominates the UK Equity Income sector in terms of size, meaning good liquidity for investors and low Charges.

CTY’s 2025 dividend equates to a dividend yield of 4.25%. Not only is this attractive in absolute terms, so too is the fact that shareholders can derive an element of reassurance that comes with knowing CTY has a 59-year track record of delivering consecutive annual dividend increases. However, this is no UK domestic play – the majority of CTY’s portfolio revenues are derived overseas. Job sees the UK equities he owns as ‘global growth at a discount’. Job expects takeovers of UK companies to continue, highlighting the value available in the UK market.

CTY also provides reassurance in another way – the share price has tended to move in a relatively narrow band with regard to the NAV. As we discuss in the Discount section, a subtle change in wording means the board has underlined its commitment to try to protect shareholders from the discount widening out. As well as its other attractions, the tight discount has been fundamental to allowing CTY to grow organically in the past through share issuance. With this move, shareholders can continue to have confidence in continued good liquidity, and that the share price should follow the NAV. In our view, CTY appears well placed to continue its leadership within the UK Equity Income sector.

Bull

• Very low OCF of 0.36%
• Consistency and experience of manager who has delivered long-term outperformance of the FTSE All-Share Index in capital and income terms
• Track record of 59 years of progressive dividend increases

Bear

• Cautious approach means that NAV can underperform in some market conditions
• Income track record highly attractive, so manager might risk long-term capital growth in trying to maintain it
• Structural gearing can exacerbate the downside

A Trust to research for ‘pair trading’.

7 Nov ’20 – 08:14 – 5 of 580  Edit

0 0

If u bought 10k of MRCH yielding 8%, it’s easier to switch
to a cash equivalent so £800 pa.
If u assume the dividend is unchanged over 10 years
but the share price doubles, u will still earn £800 pa
but it will only now yield 4%
(still 8% on buying price)

If u sold your MRCH shares say roughly 20k plus dividends earned
of 8k and re-invested in a share say a Renewable yielding 6%
your dividend would rise to £1,680 pa

If the share price doesn’t rise keep re-investing in MRCH for as long
as they don’t change their dividend policy, your dividend take
after 10 years would be £1,440, more if the share price fell as
the yield would rise.

Above is a post that I made 5 years ago, note the yield on MRCH today 5.1% and the yield on the renewables sector.

(“GCP Infra” or the “Company”)

Company update and Net Asset Value

6 November 2025

Net Asset Value

GCP Infra announces that at close of business on 30 September 2025, the unaudited net asset value (“NAV”) per ordinary share of the Company was 101.40 pence (30 June 2025: 102.14 pence), a decrease of 0.74 pence per ordinary share. The NAV takes into account cash, other assets, accrued liabilities and expenses and leverage of the Company attributable to the ordinary share class.

Forvis Mazars, the Company’s independent valuation agent, applied a sector-wide increase of 25 bps to the discount rates applicable to the Company’s renewables portfolio to reflect their view of market conditions for this asset class, including as a result of the expectation of delays to interest rate reductions and persistently high yields for benchmark long duration UK fixed income exposures. This has resulted in a negative movement of 0.38 pence per ordinary share.

Updates to forecast electricity prices, driven by higher futures forecast in the short-term, led to an increase of 0.08 pence per ordinary share, net of hedging. Actual generation across the renewable energy portfolio, net of the valuation effect of unwinding discount rates and project specific updates across the whole portfolio led to a net decrease of 0.31 pence per ordinary share.

During the period the Company has, following independent advice, updated its assessment of the level of curtailment and constraint for two onshore wind projects in Northern Ireland that participate in the Irish Single Electricity Market. This has resulted in a negative movement of 0.41 pence per ordinary share.

A summary of the constituent movements in the quarterly NAV per ordinary share is shown below.

NAV analysis (pence per share)	NAV	Change
30 June 2025	102.14
Q3 2025 power price forecasts (net of hedging)		0.08
Actual generation net of discount rate unwind and project specific updates		(0.31)
Northern Irish wind asset curtailment forecast		(0.41)
Sector-wide discount rate changes		(0.38)
Share buyback accretion to NAV		0.28
30 September 2025	101.40

Capital allocation

The Board reconfirms its commitment to the Company’s capital allocation policy set out in the 2024 Annual Report and Accounts, continuing to prioritise repayment of leverage, as well as reducing equity-like exposures and exposures in certain sectors, whilst also facilitating the return of £50 million of capital to shareholders. At 30 September 2025, the Company had £20 million (30 June 2025: £43 million) outstanding under its revolving credit arrangements, representing a net debt position of c. £8 million (30 June 2025: c. £36 million) which compares to the Company’s unaudited NAV of £849 million (30 June 2025: £864 million).

Further supporting the capital allocation policy, the Company bought back 8,937,270 ordinary shares in the quarter, contributing a 0.28 pence per ordinary share increase to NAV. In aggregate, the Company has purchased c. £23 million of shares since announcing the capital allocation policy.

The Company continues to progress transactions to dispose of assets in those sectors targeted in the capital allocation policy. If completed, such transactions would enable the Company to complete the capital allocation policy objectives of returning at least £50 million to shareholders and reducing the Company’s outstanding debt to nil. Further announcements will be made in due course, including as part of the Company’s annual report and financial statements, which are due to be published in December 2025.

Renewable Subsidy Indexation

The Company notes the recent publication by The Department for Energy Security and Net Zero of a consultation regarding potential changes to the indexation methodology applied to feed-in-tariffs and the buy-out price under the renewables obligation (the “Proposals”). The Company intends to respond to the consultation setting out objections to the Proposals: long-term investors rely on a stable policy environment and the Proposals, if implemented, would either deter future investment or increase the risk premium of future investment in projects that rely on long-term policy support. If implemented, under options one and two of the Proposals, the impact on the Company’s NAV would be a decrease of 0.46 and 1.19 pence per ordinary share respectively.

Portfolio

The Company’s portfolio continues to perform materially in line with the Company’s expectations. The Company’s mature, diverse and operational portfolio provides defensive access to stable and predictable income. It is the view of the Investment Adviser that the long-term and structural demand for infrastructure, and particularly infrastructure debt, offers investors an attractive exposure to an asset class whose performance is not correlated to wider markets and benefits from long-term and partially inflation protected income.