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Berkshire Hathaway CEO Warren Buffett and his successor Greg Abel don’t appear sold on U.S. stocks’ value proposition. Between the first quarter of 2022 and the second quarter of 2024, the pair of investors have sold billions from Berkshire’s core stock market holdings, leading the company’s cash pile to swell 161% to $276.9 billion. And the trend has only continued in the third quarter.

Berkshire has sold 150.1 million shares of Bank of America for $6.2 billion since July 17, SEC filings show, slashing its holdings of the mega bank by 14.5%. After the sale, Berkshire remains Bank of America’s largest shareholder, with an 11.4% stake worth roughly $36 billion. But the conglomerate’s $90 billion in total stock sales in the first half of 2024, followed by more large-scale sales this year, have some investors worried.

Speculation over why Buffett is selling many of his core stock market holdings has reached a fever pitch, with some arguing the billionaire investor is responding to elevated valuations, building cash for a big acquisition, or even preparing for a recession or market downturn.

Haruki Toyama, portfolio manager and head of the Mid and Large Cap Team at Madison Investments, said he doesn’t see Buffett’s stock sales as an explicit bearish market call, however.

“I think if you look at [Buffett’s] track record, maybe every couple decades, he comes out and explicitly says: ‘Hey, stocks are really cheap or stocks are expensive,’” Toyama, who has held Berkshire shares in some of his funds since the 1990s, told Fortune. “He hasn’t done that recently. So I take him at his word, and I don’t think he thinks it’s really extreme either way.”

Toyama said that Berkshire’s moves to raise cash shouldn’t be entirely ignored, however—they certainly could be a sign that Buffett and company feel stocks are at least moderately overvalued.

To his point, the famous “Buffett indicator,” which compares U.S. GDP to its total stock market capitalization in order to gauge the relative value of stocks, is now more than two standard deviations above its historical average, typically a sign that stocks are richly valued. The Oracle of Omaha famously told Fortune in 2001 that the Buffett indicator is “probably the best single measure of where valuations stand at any given moment.”

Historically, when Berkshire has increased its cash position dramatically, it signaled rocky times ahead as well. “If you go back, the last time [Berkshire] had this much cash relative to book value was before the financial crisis,” Toyama noted. “So you can make the case that maybe [Buffett is] thinking a little bit more about risk.”

The veteran PM argued that stocks as a whole do appear to be “on the expensive side,” but that doesn’t mean Buffett sold Bank of America because he fears a market crash is coming. Buffett and his team are disciplined capital allocators who are likely considering their holdings on a case by case basis.

“He’s just trimming as he looks at his stocks and feels they’re expensive, and he’s not necessarily feeling compelled to reinvest,” Toyama said. “Is it a market call? No, but I think implicitly, he’s finding less attractive risk-rewards out there. So you can make the case that he thinks that there aren’t that many great opportunities out there.”

Why is Buffett selling Bank of America stock?

Deciphering the true motives behind Berkshire’s market moves is always difficult, but Toyama offered a few ideas as to why Bank of America—now Berkshire’s third-largest holding after its latest sale, behind Apple and American Express—has been on the chopping block.

First, with markets near their peak, and stocks trading at an elevated valuation according to the Buffett indicator, Buffett could be simply managing risk by locking in profits. “Bank of America stock has done fairly well since he bought it,” Toyama noted.

Berkshire first acquired Bank of America stock in the second quarter of 2007, just before the Global Financial Crisis. It certainly wasn’t the best timing. Buffett and company paid $50.61 per share for their first taste of the bank, and the stock currently trades at around $40 per share.

Still, Buffett’s willingness to stand behind Bank of America during the dark days of the GFC helped turn his original bet into a winner. Berkshire went on to buy hundreds of millions of shares of Bank of America as the bank’s price fell prior to the GFC, with the largest, 679 million share, purchase coming when Bank of America stock hit $24.27.

Then, in 2011, when banks were still reeling from losses after the subprime mortgage crisis, Buffett bought $5 billion of BofA’s preferred shares and warrants, surmising that the bank wouldn’t need any extra cash to cover its exposure to troubled mortgages like some of its peers, and his investment would turn profitable quickly.

Buffett ultimately converted his warrants in 2017, after BofA had recovered, making Berkshire the bank’s largest shareholder for the first time. He told CNBC at the time that it would be “a long time” before he sold. Berkshire’s cost basis for its Bank of America holdings is now just $14.15 per share, meaning the conglomerate has considerable profits on the books—just like Buffett anticipated more than a decade ago.

Now, Buffett is selling, and of course, investors typically don’t take profits unless they believe an investment’s potential future return has fallen, or new opportunities have presented themselves. That’s why another reason behind Buffett’s Bank of America sales could be rising “tail risks” for banks, according to Toyama.

The veteran PM noted that Buffett has been attempting to de-risk his portfolio in recent years after strong market returns. Berkshire sold its entire position in the chip maker Taiwan Semiconductor in 2023, and trimmed its stake in the Chinese EV giant BYD this year. In total, the conglomerate sold $90 billion in stocks in the first half of 2024 in a risk-off move, including more than half of its Apple stake. “My guess is he’s thinking about that with more of the banks,” he said.

Toyama noted that rising interest rates have made banks less attractive on a relative basis—with risk-free assets like Treasuries now yielding roughly 5% compared to near-zero not long ago. Buffett has also expressed his disappointment in the way many banks have managed their securities portfolios in recent years, particularly after the collapse of several regional banks last year, including Silicon Valley Bank, due to their decision to buy long-dated Treasury securities in a rising rate environment.

“He obviously has never called out Bank of America specifically. But I think in general…you could make the argument that he’s been generally disappointed by banks overall, about how they behaved—going out a little bit too long on the secured portfolio, taking too much interest rate risk,” Toyama said.

Buffett has sold other bank stocks recently, Toyma noted. After selling its entire Wells Fargo stake in 2021, Berkshire sold 21%, or 2.65 million shares, of its stake in Capital One in the second quarter, netting a strong profit.

While some investors may fear Berkshire’s stock sales mean an imminent crash is coming for stocks, Toyama said he doesn’t think that’s the real message. He noted that if Buffett was selling stocks because he felt a crash was coming, or that stocks were so overvalued he needed to take profits immediately, financial stocks aren’t the logical position to sell. Bank of America currently trades at just 14.2 times earnings, well below the 24 times earnings for the entire S&P 500.

“If you’re worried about expensive stocks in general out there, certainly banks would not be top of the list—they’re trading at 10, 11, 12 times current earnings,” he argued.