Berkshire Hathaway’s Shifting Strategies: Buffett Sells Apple and Bank of America Stocks
Buffett’s Bull Market Caution
Warren Buffett, the CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), is considered one of the greatest investors ever. Known for his optimism about the stock market, he has praised investing in funds that track the S&P 500 (SNPINDEX: ^GSPC). Buffett believes that investing in America has always paid off for investors. Despite a strong bull market this year, he has pulled back on buying stocks, leading Berkshire Hathaway to become a net seller of equities.
Berkshire’s investment portfolio shows a $69 billion decline in equity securities and a $105 billion increase in Treasury bills, indicating a move towards safer investments. Analysts view this as a sign of Buffett’s caution about the current market conditions. Stocks currently appear expensive relative to historical averages, and high equity valuations have made it difficult for Buffett to find acquisition opportunities.
The Surprise in Apple Sales
Berkshire’s stock trades are closely monitored, particularly Buffett’s move to sell a significant portion of its stake in Apple (NASDAQ: AAPL). This decision surprised many, given Buffett’s enthusiastic endorsements of the tech giant in the past. However, Berkshire’s sales of Apple shares resulted in missing out on billions in gains as the stock value continued to rise post-sale.
Warren Buffett. Image source: The Motley Fool.
Berkshire’s Investment History with Apple
Berkshire started purchasing Apple stock in 2016, at one point holding about $175 billion in shares. However, over the past three quarters, the company has trimmed this stake down. The firm sold 10 million shares in Q4 2023, 116.2 million shares in Q1 of this year, and another 389.4 million shares in Q2, leaving approximately 400 million shares still in its portfolio.
Though the exact sale prices aren’t disclosed, estimates suggest that Berkshire may have given up around $16 billion in potential gains from these transactions.
Understanding Buffett’s Decisions
Despite selling Apple shares, Apple continued to climb to new heights, spurred by excitement over the iPhone 16 and the launch of the Apple Intelligence AI platform. Buffett has remained relatively quiet about his reasons for reducing Berkshire’s Apple investment; however, he did hint at concerns regarding a possible increase in capital gains tax during a shareholder meeting in May. As political dynamics have shifted with a new administration, this risk appears less imminent.
Buffett’s selling spree isn’t limited to Apple; he also divested around $10 billion worth of Bank of America shares. This move also raises questions as Bank of America’s stock reached new highs after a strong earnings report.
Were Buffett’s Moves a Mistake?
Critics might view Berkshire’s sales of Apple and Bank of America as misguided, particularly given the current stock market levels. Buffett, however, is renowned for his contrarian investing philosophy. One of his notable quotes is, “Be greedy when others are fearful, and fearful when others are greedy.” With the S&P 500 experiencing its best nine-month performance in nearly 30 years, taking a cautious stance could be justified.
Nevertheless, many indicators suggest that the bull market is far from over. Companies like Taiwan Semiconductor Manufacturing have reported impressive earnings, and Nvidia has highlighted soaring demand for its products. Additionally, the Federal Reserve’s recent actions signal the possibility of lower interest rates, generally a positive sign for the stock market.
As we await Berkshire’s third-quarter results, the previous stock sales may appear costly in hindsight. Time will tell if Buffett’s cautious approach was prudent.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
