Warren Buffett Says the Market Is “Dangerously Expensive” — Yet He Keeps Quietly Buying These 3 Stocks

Photo by Nicholas Cappello

The broad U.S. stock market looks stretched. Very stretched.

Warren Buffett has warned for decades that when the total U.S. market value far exceeds the size of the underlying economy, investors are “playing with fire.” That measure — widely called the Buffett Indicator — recently soared past 219%, higher than the dot-com bubble and the wild bull market of the late 2010s.

And yet… the Oracle of Omaha is still putting capital to work.

Through Berkshire Hathaway, Buffett has continued to accumulate three companies he seems comfortable owning regardless of short-term valuations or market noise. Here’s why each remains on his shopping list:

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✅ Constellation Brands: A Cash-Machine With Moats Money Can Buy

Buffett initiated a stake in Constellation Brands, owner of Modelo, Corona, and several premium wine and spirits brands, and has steadily increased his position through 2025. Berkshire now owns nearly 8% of the company.

Why he likes it:

• Products people buy in every economy — consumer staples with brand loyalty

• Fat margins in premium alcohol categories

• Free-cash-flow beast: Over $1B generated in just the first half of FY2026

• Shareholder-friendly capital allocation: Steady buybacks and dividends

• A reasonable valuation compared to the broader market

Even in recessions, people still go out for a drink — and Buffett loves businesses where demand barely budges when the world wobbles.

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Lennar: Betting on America’s Housing Crunch

Berkshire owns shares of both classes of Lennar, one of the largest homebuilders in the U.S. His ongoing purchases suggest confidence in one unavoidable fact:

America hasn’t built enough homes — for years.

Key reasons Lennar likely fits Buffett’s long-game thesis:

• Structural housing shortage supports long-term demand

• Lower future mortgage rates could unleash buyers again

• Homebuilding is a business Berkshire personally understands (via Clayton Homes)

• Shares remain modestly valued for the sector

This is classic Buffett — buying into a necessary industry with decades of runway ahead.

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Pool Corp.: A “Boring” Business Buffett Loves

Pool Corp., the world’s largest distributor of pool supplies and maintenance equipment, doesn’t scream excitement. That’s exactly why Buffett likes it.

Despite a higher earnings multiple than his other recent buys, Pool checks several Buffett boxes:

• Dominant market position with scale competitors can’t match

• Recurring revenue: Over 60% tied to repairs and upkeep

• Demographic tailwinds: Aging pools and migration to warmer states

• Consistent cash generation regardless of consumer cycles

Pool ownership grows slowly — but maintenance lasts forever.

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Why Buy Anything With Valuations This High?

Buffett may think markets look overpriced. But his actions show a deeper principle:

When you find durable businesses with dependable cash flows, time is on your side.

He’s not chasing speculative tech or trendy AI names. Instead, Berkshire is leaning into:

✅ Companies selling what people buy repeatedly
✅ Industries with high replacement needs
✅ Quiet monopolies and wide competitive moats

If volatility hits, these are the sort of companies that tend to fall less — and recover first.

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The Bottom Line

While Buffett warns that the market’s current valuation is a risk worth respecting, he isn’t heading to the sidelines. Instead, he’s doubling down on what has always worked:

Simple businesses that produce real money, year after year.

Constellation Brands, Lennar, and Pool Corp. all fit that formula.

You don’t need a perfect market to make a smart investment — you just need a business built to last.