Over the weekend, Berkshire Hathaway sold a substantial portion of its Apple stock. The value of its investment in Apple fell from $174.3 billion at the end of last year to $135 billion by the end of the first quarter, and it currently stands at $84.2 billion as of June 30.
This marks a roughly 50% decrease from December to June.
Apple representatives reported that Berkshire held 915.6 million shares of Apple as of January 2. The current holdings are approximately 450 million, valued at around $88 billion.
◇ Buffett’s careful choice for pre-tax profit… He may have judged now as the time to sell
Warren Buffett mentioned at the company’s annual meeting in May that Berkshire was reducing its stake in Apple.
This was mainly interpreted as a move to realize significant capital gains, given that the investment in the giant tech company had been very successful.
Buffett joined the tech sector late in 2016 and began investing in Apple, persuaded by his longtime partner, Charlie Munger.
The profits from shares purchased between 2016 and 2018 are expected to exceed 400%.
For the shares bought between 2022 and the first quarter of 2023, when Berkshire last increased its stake in Apple, the pre-tax profits are expected to reach 20%.
◇ Typical value investor Buffett secures cash sources after selling
Berkshire Hathaway and Buffett have channeled most of their realized gains into cash and Treasury bonds, creating a readily accessible cash reserve for capital gains taxes.
Crucially, Buffett and Berkshire are waiting for the right opportunities.
As a quintessential value investor, Buffett avoids chasing popular stocks. Instead, he and Berkshire focus on acquiring great companies at the right price.
Like many investors, Buffett and his team closely monitor stock market volatility. They look for attractive investment opportunities at better prices while keeping their cash reserves.
◇ Some interpret concerns about Apple’s business in China
There are counterarguments to this perspective. Some Apple analysts, including CNBC’s Jim Cramer, suggest concerns about Apple’s substantial business in China might be a factor.
Apple’s third-quarter sales of products and services in China dropped by 6.5% year over year and 10% compared to last year.
Political tensions between China and the U.S. could also contribute to these concerns.
◇ Amid market turmoil, Apple shares rise
On the other hand, Apple investors are now more confident about the company. The stock price rose by 23.6% in the second quarter of 2024 after falling by 10.9% in the first quarter. It increased by 3.9% in the third quarter.
Moreover, during a week when Amazon fell by 8%, Microsoft by 4%, and Nvidia by 5.1%, Apple rose by 1%. Apple’s stock price has increased by 14.2% this year.
Apple has reclaimed its status as the world’s most valuable company, boasting a market capitalization of $3.37 trillion.
However, the stock still appears slightly overpriced, with a forward price-to-earnings ratio of about 30. The forward price-to-earnings ratio of the S&P 500 is about 22, which is lower than the peak of 22.72.
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