Berkshire Hathaway continues dumping AAPL to build up cash reserves

AppleInsider

Financial firm Berkshire Hathway has spent a year reducing its shares of AAPL stock, which once took up half of chairman Warren Buffett's entire portfolio.

Buffett meets with Apple CEO Tim Cook. Image credit: Apple

For the fiscal third quarter 2024, which ended on September 30, Buffett still held $69.9 billion in AAPL, or around 300 million shares. One year ago, his firm had four times as many shares in the iPhone maker.

Berkshire Hathaway has given no reason for the year-long selloff, though other financial analysts have speculated that Buffett may consider the stock overvalued. AAPL is up 20 percent for the year so far, which compares to the average performance of the S&P 500 overall for 2024.

Buffett and his managers have been selling Apple stock for across last four quarters. Buffett himself has suggested that he believes a higher tax on capital gains is coming.

The rise and fall of Buffett's AAPL holdings

Currently, AAPL is hovering between $220 and $230 per share, up significantly from a 2024 low of $165. Buffett first began buying stock in the iPhone maker in 2016, having previously mostly avoided investments in technology firms.

Apple stock quickly became a mainstay of Berkshire Hathaway's fund over the years, at one point reaching a $170 billion-plus stake in the company. In mid-2024, the firm surprised markets when it dumped half of its previous Apple holdings in a single quarter.

Buffett has frequently said he "fell in love" with Apple because of the loyalty customers have for the brand, alongside the massive success of the iPhone in particular. However, selling the stock has helped Berkshire Hathaway amass a cash hoard of some $352 billion, the highest the firm has ever held.



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blastdoor

There's a ton of risk in the world right now. It makes sense to me to sell a stock that is highly exposed to China/Taiwan risk. It also makes sense to want to build up cash reserves.

It's encouraging that Apple has been able to increase production in India and that it's becoming feasible to produce Apple Silicon in Arizona. But there's still a long way to go. Maybe Buffet will return to AAPL once Apple has reached a point where they could credibly survive without the Chinese supply chain.  

I wonder if it makes more sense to invest in companies that build physical things in North America -- construction, infrastructure, defense, manufacturing. 

foregoneconclusion

Buffett isn’t getting any younger. It could be related to estate prep.

ssfe11

New mgrs are running Berkshire. Munger is dead and Buffett is 94. Buffet is not involved

stompy

The reason is literally in the first sentence of this article: "Financial firm Berkshire Hathway has spent a year reducing its shares of AAPL stock, which once took up half of chairman Warren Buffett's entire portfolio."

Kierkegaarden

This the same firm that exited a large position in TSM when it was under $100/share before it more than doubled.  They also exited IBM before the run up, and sold airlines at the bottom in 2020.  Plenty of examples of poor decisions, as all investors have.  The fact that the firm sold more shares doesn’t seem to reflect negative stock performance — if anything, it probably means the stock will grind higher.

Marvin

foregoneconclusion said:

Buffett isn’t getting any younger. It could be related to estate prep.

He was asked the question at a meeting:



The answer isn't entirely clear but he mentioned building up cash reserves due to the current state of the economy and lack of investment opportunities. There are a few people predicting a market downturn due to overvaluations and having significant cash reserves will allow buying shares at low prices if there's a correction. Due to high valuations, there's not many opportunities for high returns just now (3:30):



https://markets.businessinsider.com/news/stocks/stock-market-crash-bubble-correction-dot-com-tech-overvalued-ai-2024-6?op=1
https://markets.businessinsider.com/news/stocks/stock-market-bubble-warning-signs-signals-ai-stocks-earnings-profits-2024-6

Apple is valued at $3.3 trillion. When Buffet started investing they were around 1/6th this. It's not likely Apple will go to 5 trillion any time soon when their revenues are starting to level out and their p/e is 36. It makes sense to lock in their gains and wait for growth opportunities.

Pema

What's Buffy saying in the picture: 

WB: Look I flew out here to meet with my mate Tim. Alright. Stop following us around. 
Journo: Any particular reason you have your right arm around Tim? 
WB: That's really none of your business. Now, piss off, will ya!

michelb76

Kierkegaarden said:

This the same firm that exited a large position in TSM when it was under $100/share before it more than doubled.  They also exited IBM before the run up, and sold airlines at the bottom in 2020.  Plenty of examples of poor decisions, as all investors have.  The fact that the firm sold more shares doesn’t seem to reflect negative stock performance — if anything, it probably means the stock will grind higher.

It has absolutely nothing to do with the stock(s) they are selling, and everything with macro trends and risk management.

retrogusto

The likelihood that capital gains taxes will increase in the near future seems like a very good reason. His shares have appreciated a lot since he bought them, and there are a lot of shares, so even a relatively small percentage would translate to a huge amount of money. I’m sure he’d be among the first to agree that it makes sense for someone with a multi-billion dollar windfall to pay into the system, but he still has a responsibility to manage things as efficiently as he can. He also needs to balance his risk and may have ideas for other companies poised for faster growth, but it doesn’t mean he thinks Apple won’t continue to grow. 

lowededwookie

How is Apple overvalued? Of ALL computer and software manufacturers Apple is the only company producing exciting hardware. Intel is loosing the plot with its pathetic small speed updates and yet the PC world laps them up. AMD is let’s face it dead in the water and has done nothing truly exciting since they started to take on Intel at their own game.

It’s for this reason I knew in 2006, when Apple went Intel because PPC was too slow in giving Apple what it wanted, that Apple would ditch Intel for their own chips. I was laughed at and yet here we are at the M4, fours years into Apple’s transition.

I mean, to be fair, Intel did keep its promise last year that by 2023 they’d have a chip capable of beating the M1… around the same time Apple released the M3.

If stock performance was based on products shipped then surely it means Apple is incredibly UNDERvalued.

But Buffet is right, the economy will tank. How can it not? The way it’s all set up it’s all on a knife’s edge. Currencies aren’t based on tangible products anymore and haven’t been for decades. It’s all smoke and mirrors and is essentially the greatest Ponzi scheme history has ever seen. It HAS to collapse. I’m not so sure having huge cash reserves will be a benefit though. If the economy crashes and the dollar has no value then surely you’ll just be sitting on a huge pile of worthless paper.

gatorguy

PED says: Apple "debt shelf" is more interesting. 

Fred257

He is putting a lot into SIRI Sirius XM, millions of shares

mikethemartian

lowededwookie said:

How is Apple overvalued? Of ALL computer and software manufacturers Apple is the only company producing exciting hardware. Intel is loosing the plot with its pathetic small speed updates and yet the PC world laps them up. AMD is let’s face it dead in the water and has done nothing truly exciting since they started to take on Intel at their own game.

It’s for this reason I knew in 2006, when Apple went Intel because PPC was too slow in giving Apple what it wanted, that Apple would ditch Intel for their own chips. I was laughed at and yet here we are at the M4, fours years into Apple’s transition.

I mean, to be fair, Intel did keep its promise last year that by 2023 they’d have a chip capable of beating the M1… around the same time Apple released the M3.

If stock performance was based on products shipped then surely it means Apple is incredibly UNDERvalued.

But Buffet is right, the economy will tank. How can it not? The way it’s all set up it’s all on a knife’s edge. Currencies aren’t based on tangible products anymore and haven’t been for decades. It’s all smoke and mirrors and is essentially the greatest Ponzi scheme history has ever seen. It HAS to collapse. I’m not so sure having huge cash reserves will be a benefit though. If the economy crashes and the dollar has no value then surely you’ll just be sitting on a huge pile of worthless paper.

You need to do a NPV calculation to determine what any financial asset is worth.

13485

lowededwookie said:

How is Apple overvalued? Of ALL computer and software manufacturers Apple is the only company producing exciting hardware. Intel is loosing the plot with its pathetic small speed updates and yet the PC world laps them up. AMD is let’s face it dead in the water and has done nothing truly exciting since they started to take on Intel at their own game.

It’s for this reason I knew in 2006, when Apple went Intel because PPC was too slow in giving Apple what it wanted, that Apple would ditch Intel for their own chips. I was laughed at and yet here we are at the M4, fours years into Apple’s transition.

I mean, to be fair, Intel did keep its promise last year that by 2023 they’d have a chip capable of beating the M1… around the same time Apple released the M3.

If stock performance was based on products shipped then surely it means Apple is incredibly UNDERvalued.

But Buffet is right, the economy will tank. How can it not? The way it’s all set up it’s all on a knife’s edge. Currencies aren’t based on tangible products anymore and haven’t been for decades. It’s all smoke and mirrors and is essentially the greatest Ponzi scheme history has ever seen. It HAS to collapse. I’m not so sure having huge cash reserves will be a benefit though. If the economy crashes and the dollar has no value then surely you’ll just be sitting on a huge pile of worthless paper.

Since the beginning of the idea of "currency" it has always been based on a belief that someone else will value whatever your trade item or the accepted equivalent currency is and give you something equally acceptable for it in exchange. There is no inherent value in any currency including gold; it's whatever someone else will give you for it. This has been the accepted way for any society that has moved beyond straight barter for labor or hard goods for thousands of years.

eriamjh

This is from August so the calculation would be different today, but...

https://www.investors.com/etfs-and-funds/sectors/sp500-warren-buffett-panic-sale-of-apple-stock-cost-6-2-billion/

Buffet's fortunes wax and wane as much as the apparent tide level effects the amount of water in the ocean.  Sure, it looks like the water moves a lot, but it's nothing on the grand scale. 

Kierkegaarden

michelb76 said:

Kierkegaarden said:

This the same firm that exited a large position in TSM when it was under $100/share before it more than doubled.  They also exited IBM before the run up, and sold airlines at the bottom in 2020.  Plenty of examples of poor decisions, as all investors have.  The fact that the firm sold more shares doesn’t seem to reflect negative stock performance — if anything, it probably means the stock will grind higher.

It has absolutely nothing to do with the stock(s) they are selling, and everything with macro trends and risk management.

You’re missing the point — regardless of what risks or trends he may have seen, it was a misjudgment.  He makes mistakes like any investor.  Nobody can time the market.

welshdog

The firm may also be preparing for a rotation away from tech stocks and chip makers. The performance of those two sectors has been huge, but now there are signs a broader uptrend is emerging that may overtake the tech sector. Small caps and midcaps have performed well viewed in isolation, but they pale next to NASDAQ and SP500 tech performance over the last two years. All that may be changing as the uptrend gets extended to wider array of companies, while tech is beginning to falter a bit.

YP101

I guess Berkshire's management are expected USA economy downfall next 1-2 years. Most faineance managers thought is in line with.

AAPL's PE ratio is in line with most of big tech except NVDA. I don't think AAPL is overpriced.
NVDA does.

If USA economy does not fall back then they will buy back. So far Apple lunch M4 products and seems M4 Mini might some boost sales for 4th QTR.
Next AAPL earning will be interesting.

lowededwookie

13485 said:

lowededwookie said:

How is Apple overvalued? Of ALL computer and software manufacturers Apple is the only company producing exciting hardware. Intel is loosing the plot with its pathetic small speed updates and yet the PC world laps them up. AMD is let’s face it dead in the water and has done nothing truly exciting since they started to take on Intel at their own game.

It’s for this reason I knew in 2006, when Apple went Intel because PPC was too slow in giving Apple what it wanted, that Apple would ditch Intel for their own chips. I was laughed at and yet here we are at the M4, fours years into Apple’s transition.

I mean, to be fair, Intel did keep its promise last year that by 2023 they’d have a chip capable of beating the M1… around the same time Apple released the M3.

If stock performance was based on products shipped then surely it means Apple is incredibly UNDERvalued.

But Buffet is right, the economy will tank. How can it not? The way it’s all set up it’s all on a knife’s edge. Currencies aren’t based on tangible products anymore and haven’t been for decades. It’s all smoke and mirrors and is essentially the greatest Ponzi scheme history has ever seen. It HAS to collapse. I’m not so sure having huge cash reserves will be a benefit though. If the economy crashes and the dollar has no value then surely you’ll just be sitting on a huge pile of worthless paper.

Since the beginning of the idea of "currency" it has always been based on a belief that someone else will value whatever your trade item or the accepted equivalent currency is and give you something equally acceptable for it in exchange. There is no inherent value in any currency including gold; it's whatever someone else will give you for it. This has been the accepted way for any society that has moved beyond straight barter for labor or hard goods for thousands of years.

Money was never developed as a concept. It came about as IOUs produced by people who set themselves up as gold reserves. They would take gold from one person to loan to another person producing an IOU to keep a record of how much was used. They'd then pay that gold back when they got paid.

Eventually people just traded IOUs because it was easier to do that than trade in actual gold. These IOUs eventually became what we know of as paper money and was invented by the Chinese and flowed to the rest of the world.

Money therefore was tied to gold because it literally represented how much gold a person had at a particular gold reserve.

However, as economies grew and banking systems became more centralised by governments (except for America) they realised they could print as much money as they needed. But to keep the value of that currency they needed create inflation. So costs of things go up but the supply also goes up and eventually trickles down to the lower rungs on the ladder... although not without first creating huge financial issues for the lessers.

There is now more money that physical assets on this planet and so inflation will be here to stay which means economic turmoil will get worse to the point the whole system will collapse. It's just a matter of when.