Berkshire Hathaway’s Investment Moves: A Look at Buffett’s Strategy

Warren Buffett is considered one of the greatest investors in history, with nearly 70 years of impressive results. If you bought shares of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) back in 1965 when Buffett took the helm, your investment would have soared by 4,384,748% as of last year. In comparison, the S&P 500 achieved a cumulative return of only 31,223% during the same period.

Under Buffett’s guidance, Berkshire Hathaway’s investable assets have exceeded $600 billion. However, Buffett’s recent stock market actions show a more cautious approach. He has made significant sales in two major holdings: Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC). Instead, he has directed much of that money towards a single high-yield investment.

Here’s what investors should pay attention to.

Image source: The Motley Fool.

Buffett’s $133 Billion Stock Sell-Off in 2024

During the first nine months of 2024, Buffett, through Berkshire, sold a staggering $133 billion in stock.

Most of these sales came from Apple, where Berkshire held 905.6 million shares at the beginning of the year. At one point, Apple accounted for nearly half of the equity portfolio managed by Buffett and his team. However, since then, Buffett has reduced his stake significantly.

In the first quarter alone, Buffett sold 116 million shares; in the second quarter, he sold 389 million shares, and another 100 million shares in the third quarter. Currently, Berkshire Hathaway holds 300 million shares of Apple. This remaining stake is worth roughly $70 billion, which still represents over 23% of Berkshire’s entire equity portfolio. During a shareholder meeting in May, Buffett indicated that Apple is likely to remain the largest common stock holding in Berkshire by year-end.

There is a possibility that Buffett may continue to sell Apple shares in the fourth quarter, especially since the stock recently reached an all-time high and is trading close to that level.

Buffett has also focused on his position in Bank of America lately. Between July and October, Berkshire sold more than $10.5 billion worth of shares. Consequently, Berkshire’s stake in the bank has dipped below 10%. Shareholders will have to await the next earnings report and 13F filing to see if Buffett continued to trim this position. Given the current stock price, which is higher than any previous sales, it is likely that he may have sold more.

Buffett’s selling isn’t purely about price. He has expressed concerns regarding the potential increase in corporate tax rates once the current tax laws expire at the end of 2025. Without a congressional extension, the rate could soar from 21% to 35%. While a Republican administration may push for the maintenance of current rates, there are no guarantees.

This year, Buffett has capitalized on the opportunity to secure the 21% tax rate on more than $97 billion in capital gains. It’s notable that he hasn’t fully liquidated every long-term capital gain position. Berkshire retains around $193.5 billion worth of unrealized gains. His recent sales suggest he perceives Apple and Bank of America as overvalued compared to their true worth.

A Major Investment in Treasury Bills

Despite selling billions in stock during 2024, Buffett has not been aggressively buying new equities. His total equity purchases amount to only $5.8 billion across the first three quarters. He has also reduced share repurchases of Berkshire stock, which totaled $2.9 billion this year. The private investments were limited to a $2.6 billion stake in Pilot.

This has left Buffett with a substantial amount of cash, which he is now investing primarily in short-term Treasury bills. For decades, he has championed government bonds, reiterating in each earnings report, “We continue to believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments.”

Buffett’s Treasury bill holdings have increased by $157.2 billion this year. The yields for these bills, which mature between one to six months, range between 4.5% and 4.65%. This rate surpasses the yield offered by the 10-year Treasury as of now.

Buffett is content to collect interest while he searches for worthwhile investment opportunities. He states that even without attractive yields, putting money into Treasury bills remains the best choice at present.

While it may seem Buffett is pessimistic about the stock market, he believes the vast size of Berkshire Hathaway’s portfolio significantly narrows suitable investment options. With over $600 billion in investable assets, the potential for impactful investments aligns with only a few of the world’s largest companies.

In May, Buffett gave a different perspective at Berkshire’s shareholder meeting, indicating he still sees vast opportunities for smaller investors. He mentioned, “$10 million I think Charlie or I could earn high returns on.” This is a sum that most individual investors wouldn’t be able to manage. Overall, smaller investors have a wider range of stocks available to them.

Though Buffett is divesting from major companies like Apple and Bank of America while investing in Treasury bills, individual investors should not feel compelled to mimic his actions closely.

The Next Investment Opportunity Awaits

Do you often feel like you’ve missed the boat on the most successful stocks? If so, this might just be the moment you need to hear about.

Our team of analysts occasionally issues a special “Double Down” stock recommendation for companies poised for significant growth. If you’re concerned that you might have overlooked an investment chance, now could be the ideal time to act before it’s too late. Historical data supports this:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $350,915!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,492!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $473,142!*

Currently, we’re issuing “Double Down” alerts for three exceptional companies, and opportunities like this may not arise again soon.

Explore 3 “Double Down” stocks »

*Stock Advisor returns as of November 25, 2024

Bank of America is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. 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.