Warren Buffett’s Strategic Moves: Cashing Out on Apple and Investing in Sirius XM

When it comes to Wall Street, few figures draw as much attention as Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) head, Warren Buffett. Often referred to as the “Oracle of Omaha,” Buffett has guided his company’s Class A shares (BRK.A) to an incredible return of over 5,600,000% since he took the helm nearly 60 years ago.

Investors frequently look to replicate Buffett’s success by mimicking his trades, an easy task thanks to the mandated Form 13F filings with the Securities and Exchange Commission (SEC).

Institutional investors managing at least $100 million are required to file these reports within 45 days after each quarter ends. These documents provide clear insights into the trading behaviors of Wall Street’s top investors. Notably, Berkshire Hathaway’s filings are among the most eagerly awaited each quarter.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Massive Sell-off of Apple Shares

Recently, Buffett and his team have been significant net sellers of stocks. Between October 1, 2022 and June 30, 2024, they sold about $132 billion more in stocks than they bought, highlighted by a notable reduction in their stake in Apple.

In the nine months up to June 2024, Berkshire cut its Apple holdings by over 515 million shares, a staggering 56% drop, leaving them with approximately 400 million shares.

Some analysts view this selling as strategic profit-taking. During the annual shareholder meeting in May, Buffett hinted at the likelihood of rising corporate tax rates, suggesting that realizing some gains now could benefit shareholders in the long run.

Buffett remains a fan of Apple’s strong branding and customer loyalty, even as he significantly reduced his company’s top position in the tech giant.

He has expressed admiration for Apple CEO Tim Cook, who has led a transformation towards the higher-margin Services segment. Under Cook, Apple initiated the largest share buyback in history, repurchasing $700.6 billion worth of stock since 2013 while reducing the outstanding share count by 42.2%. This has positively impacted Apple’s earnings per share (EPS).

However, Apple’s growth seems to be stagnating, with weak sales in its hardware offerings over the past two years. This stalls in growth can cause valuation issues for a company that trades at a high multiple.

When Berkshire first acquired Apple shares in 2016, the tech giant was valued at 10 to 12 times its trailing EPS. Today, that figure has climbed to nearly 36 times trailing earnings, a valuation that could deter Buffett, known for his value investment approach.

Buffett Investing Heavily in Sirius XM

While Buffett’s selling spree has raised eyebrows, one company that he is actively buying into is Sirius XM Holdings (NASDAQ: SIRI).

In December, Sirius XM announced plans to merge with Liberty Media’s tracking stock, Liberty Sirius XM Group, to simplify the structure. The recent 1-for-10 reverse stock split raised Sirius XM’s share price significantly, from the mid-$2s to the mid-$20s.

Interestingly, this reverse split was not due to financial weakness but aimed at attracting more interest from institutional investors, particularly Buffett.

Buffett’s Berkshire continues to accumulate shares in both Sirius XM and Liberty Sirius XM Group. A recent SEC filing revealed the purchase of an additional 1.56 million shares, bringing Berkshire’s total holdings to over 110 million shares—nearly one-third of Sirius XM’s outstanding shares.

One of the reasons Buffett favors Sirius XM is its status as a legal monopoly in satellite radio. Although it competes with traditional radio, it remains the only licensed satellite radio operator, granting it pricing power and predictable cash flow.

Unlike typical radio businesses that rely heavily on advertising, which can fluctuate with economic conditions, Sirius XM generates 77% of its net sales from subscriptions. This stability could insulate it from economic downturns.