By eating his own cooking, Warren Buffett’s built a phenomenal fortune worth $150bn. And in 2025, his timeless wisdom seems more relevant than ever as both US and UK stocks reach new record highs.
With valuations reaching lofty levels, the risk of investing is rising, especially as investors become increasingly more greedy.
That’s why some are warning of an incoming correction, or possibly even a full-blown stock market crash. So what does the ‘Oracle of Omaha’ recommend in today’s market climate?
Prepare, don’t predict
Buffett’s long stressed that no one can reliably time market chaos. There are so many influencing factors that have derailed catastrophe predictions from even the smartest minds within the investing community. However, as markets become frothy like today, he’s also urged investors to prepare just in case.
That means being patient, avoiding being lured into investments by the fear of missing out, and building a cash cushion to provide liquidity. All three of these steps mitigate portfolio volatility and help reframe corrections for what they truly are – opportunities, not catastrophes.
Focus on the business, not the stock
When the market is near all-time highs, Buffett may still do a bit of shopping. If the underlying business shows enough promise with a reasonable valuation, he and his team at Berkshire Hathaway have often pounced on opportunities.
The same principle applies when the market is in freefall. All too often, panicking investors will throw the baby out with the bathwater, resulting in wonderful businesses being sold off, creating bargains for those with cooler heads.
What I’m doing in 2025
As the markets reach new record highs, so has my growth portfolio with chunky double-digit gains since the start of the year. While chunky returns are nice to celebrate, I’m definitely growing more cautious, particularly as today’s valuations don’t seem to reflect the looming economic headwinds, particularly in the US.
That’s why I’ve been steadily trimming some of my largest holdings to follow Buffett’s advice and build cash.
But I’m not just selling bit by bit. Even though I suspect the stock market’s overheating, there are still opportunities to be found. And one that I’ve got my eye on for my income portfolio is Howden Joinery (LSE:HWDN).
Over the last 12 months, the fitted kitchen and bedroom supplier has lagged the FTSE 100. That’s despite earnings proving to be quite resilient, resulting in an undemanding price-to-earnings ratio of 17.9.
The UK home renovation market remains relatively soft due to higher interest rates, causing investor sentiment surrounding businesses in this sector, like Howden, to weaken. Yet, through operational optimisations across its depot network and pricing adjustments, management has successfully offset some of the impact through self-help actions.
Subsequently, dividends and buybacks have continued to flow. And with interest rates steadily being cut, analyst projections suggest 2026 could spark the beginning of a sector-wide recovery.
The timing of this rebound isn’t set in stone. And the recovery may prove weaker than expected, with pressure mounting from competitors, likely resulting in further lacklustre returns for investors. Nevertheless, given the group’s track record of prudent capital allocation, I’m tempted to expand my existing position in this business.
But it’s not the only Buffett-like opportunity I’m watching closely right now…
