Warren Buffett’s Berkshire Hathaway has been unloading shares of one of its biggest holdings, Apple Inc. (NASDAQ:AAPL), across several quarters.
The first quarter of 2024 saw Warren Buffett selling 115 million Apple Inc. (NASDAQ:AAPL) shares, about 13% of its stake. Berkshire Hathaway’s Apple stake stood at 790 million shares at the end of the first quarter. Based on Apple’s March 31 closing price, the company sold approximately $20 billion worth of Apple shares, likely spread across multiple transactions. Apple Inc.’s shares fell nearly 11% during the same period.
On top of the 115 million shares sold during Q1 2024, Buffett went on to unload another 390 million shares in the second quarter. The sales led to a boost in Berkshire Hathaway’s cash reserves to a record $277 billion, up 47% from the first quarter. Despite Apple’s slowing sales and a weak macroeconomic environment in China, the iPhone maker’s stock was up.
In the third quarter, Buffett’s company sold 100 million more Apple shares, leaving Berkshire with about $70 billion worth of stock. This reduced its stake in the iPhone maker to 300 million shares. Meanwhile, Apple’s shares rose more than 10% in the third quarter.
According to Warren Buffett, selling Apple stocks made sense as Buffett believes stocks are trading above their intrinsic value and capital gains taxes are also likely to rise. This makes it advantageous to realize gains at the current lower tax rate as Buffett is trying to lock in profits before potential tax hikes. Another reason for selling the shares is to reduce exposure since the stock had become a very large portion of its portfolio.
Despite Berkshire reducing its stake, Apple’s stock price increased from $192.53 at the end of 2023 to $233 by the end of the third quarter of 2024, reflecting a 15.8% YTD gain. This suggests strong market demand for Apple shares and investor confidence in the company. Moreover, the selling strategy employed by Berkshire not only allowed it to book substantial gains but also preserved the stock’s upward momentum. All in all, the company has effectively realized over $100 billion in profits from a seven-year investment, and there is confidence that Berkshire will reinvest the funds effectively over time.
Here is how Vltava Fund explained why Buffett was Apple Inc. (NASDAQ:AAPL) stock in its Q3 2024 investor letter:
“You probably have not missed the news that Warren Buffett has already sold half the stock from his largest public markets investment, Apple Inc. (NASDAQ:AAPL). It was a phenomenal investment for Berkshire. Over the course of seven years or so, it brought a profit of well over USD 100 billion. Apple comprised a very large position within Berkshire’s public portfolio, and this was the reason we avoided Apple stock outright during that time. We considered our exposure to Apple through our holdings of Berkshire stock to be sufficient, and we ended up making a lot of money on it. There has been a great deal of speculation in the market about what Buffett’s sale of Apple signals regarding his view of the stock market. I think the reason for the sale is much simpler. Buffett probably considers Apple stock so expensive that he prefers to cash in at 20% less (after all, Berkshire must pay tax on its profits). He started selling in the first quarter of the year. When I was in Omaha for the general meeting in May, Buffett said he was still selling, and I expect he continued to do so in the third quarter. I have to say that, as a Berkshire shareholder, I am happy about the Apple sale. I think Berkshire’s management will find a better use for this money, as they always have in the past. It is quite likely that they already have a very specific idea about this. If that takes two or three years, it does not matter at all. This is not a race and, in the meantime, the risk of holding Berkshire Hathaway stock itself has been greatly reduced.”
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Disclosure: None. This article is originally published at Insider Monkey.
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