OMAHA, Neb. (AP) — Billionaire Warren Buffett significantly reduced Berkshire Hathaway’s substantial Apple stake, a move that could potentially unsettle the stock market. This is notable because of Buffett’s esteemed reputation and the lack of positive financial developments in recent times.
Just two years ago, Buffett referred to Apple as one of the major pillars of his conglomerate’s business, alongside Berkshire’s insurance, utility, and BNSF railroad businesses. This led investors to believe that Buffett might hold onto Apple shares indefinitely, similar to his long-term holdings in Coca-Cola and American Express.
Despite this perception, Buffett has been gradually reducing his Apple stake over the past year, along with selling off some Bank of America and BYD shares while refraining from significant buying activity.
As a result, Buffett now holds nearly $277 billion in cash, a sharp increase from the previous record of $189 billion just three months ago.
“This move could potentially unsettle the markets, particularly given recent events such as weak tech earnings, a disappointing jobs report, and uncertainty surrounding interest rates,” noted Edward Jones analyst Jim Shanahan.
Buffett has consistently praised Apple CEO Tim Cook, who made an appearance at Berkshire’s annual meeting in Omaha in May, and highlighted the strong customer loyalty towards iPhones. Buffett trimmed over 10% of Berkshire’s Apple stake in the first quarter by selling more than 116 million shares, but the recent sale disclosed a much larger reduction.
Although Berkshire did not provide an exact count of its Apple shares in the report, it estimated the investment value to be $84.2 billion at the end of the second quarter, even though Apple shares had surged to $237.23 during the summer. By the end of the first quarter, Berkshire’s Apple stake was valued at $135.4 billion.
Shanahan suggests that Berkshire still retains approximately 400 million Apple shares.
While CFRA Research analyst Cathy Seifert views the Apple sale as a strategic portfolio adjustment due to Apple’s significant portion in Berkshire’s holdings, it indicates Buffett may be preparing for a potential downturn.
“This move signifies a company gearing up for a weaker economic climate,” Seifert commented.
Berkshire reported a slight decrease in bottom-line earnings due to a decline in the paper value of its investments. The company reported earnings of $30.348 billion, or $21,122 per Class A share, in the second quarter, down from $35.912 billion, or $24,775 per A share, a year ago.
Buffett has consistently advised investors to focus on Berkshire’s operating earnings for a more accurate performance assessment, as these figures exclude investment gains and losses that can vary significantly each quarter.
By this measure, Berkshire’s operating earnings rose over 15% to $11.598 billion, or $8,072.16 per Class A share, from $10.043 billion, or $6,928.40 per Class A share, a year ago. Geico drove the improvement in Berkshire’s businesses while several other companies sensitive to the economy reported lackluster results.
The reported earnings exceeded the $6,530.25 per share forecasted by four analysts surveyed by FactSet Research.
Berkshire owns various insurance businesses, BNSF railroad, major utilities, and a diverse portfolio of retail and manufacturing businesses including Dairy Queen and See’s Candy.
Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
