Warren Buffett’s Berkshire Hathaway has slashed its stake in iPhone maker Apple in half as part of a selling spree in which the billionaire investor dumped $76 billion (€70 billion) of stocks.
The company cut its position in Apple by more than $50 billion to $84.2 billion in the second quarter, generating huge investment profits, according to filings published on Saturday.
The data suggested that Berkshire had sold roughly 390 million Apple shares, or about half of its stake, according to calculations by the Financial Times. The sales of Apple and other stocks produced an after-tax realised gain of $47.2 billion, a sizeable return on an investment that was first initiated by one of Buffett’s deputies in 2016.
The stock sales lifted Berkshire’s cash holdings to a record high of $277 billion, up $88 billion from the previous quarter. The company ploughed those proceeds into short-term treasuries, as Mr Buffett scaled back in US equity markets.
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Late last year Mr Buffett began to pare back Berkshire’s stake in Apple, and in early 2024 he quickened the pace of stock sales. In May, he signalled to shareholders that he believed Apple would remain one of the conglomerate’s big holdings, listing it among core long-term investments including Coca-Cola and American Express.
“Unless something dramatically happens that really changes capital allocation strategy, we will have Apple as our largest investment,” Mr Buffett said at the company’s annual meeting in May.
“But I don’t mind at all, under current conditions, building the cash position ... when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.”
Apple has been one of Berkshire’s most important equity investments in recent years, as US tech stocks powered the broader market higher.
Previously Mr Buffett and his late investment partner Charlie Munger had long been wary of investing in technology companies, and over the years lamented the fact that they had sat out opportunities in businesses such as Google. The company did poorly when it invested in tech, notably with IBM in 2011.
But his reluctance to invest in the industry shifted in 2016, when Mr Buffett dove into Apple. Berkshire has spent roughly $40 billion buying its shares since then, the FT estimates.
That sum includes purchases by Mr Buffett as well as his investment deputy who first put on the trade and an insurance unit Berkshire owns that also bought into the company.
Apple’s stock has delivered a total return of nearly 800 per cent since Berkshire first disclosed its investment.
Christopher Rossbach, the chief investment officer of Berkshire investor J Stern & Co, said the sales of Apple stock were a “sign that the valuation discipline that [Buffett] talks about as core to his investment decisions is very much at the forefront of his thoughts”.
“The question of how he will deploy the cash and whether he can find investment opportunities among stocks ... or returns it to shareholders through buy-backs will be an ongoing question that will not go away,” Mr Rossbach added.
Jim Shanahan, an analyst at Edward Jones, noted that Mr Buffett had also pointed to potentially higher capital gains taxes in the years ahead as one reason he might sell out of some holdings.
Mr Buffett did not respond to a request for comment.
Berkshire separately disclosed that it had continued to sell out of some of its other positions after the end of the second quarter.
In recent weeks the company has sold $3.8 billion of Bank of America shares over 12 consecutive trading days, paring a highly profitable bet. The sales cut Berkshire’s stake in the US bank by a percentage point to 12.1 per cent, according to filings with US securities regulators.
Berkshire has benefited from the Federal Reserve’s interest rate rises over the past two years, boosting interest income on its portfolio of treasury bills. The company earned $2.6 billion in interest income in the second quarter and $8 billion over the past year, eclipsing the $5.4 billion it received in dividends on its $285 billion stock portfolio.
Berkshire’s earnings are normally pored over for insights into Mr Buffett’s investment views, as well as for signs of how the US economy is performing. The quarterly results pointed to cooling economic growth, although the economy still appears to be in good overall shape.
Operating earnings rose 15 per cent from a year earlier, to $11.6 billion. Profits were bolstered by a rebound in Berkshire’s insurance unit. Pretax underwriting profits at car insurer Geico more than tripled to $1.8 billion as it increased prices for policyholders.
Revenues at Berkshire’s railroad BNSF were flat, as higher volumes of consumer product shipments were offset by a slide in the amount of coal it transported. The company said sales at several of its manufacturing businesses, including Marmon and Iscar, fell in the quarter.
Revenues increased at its segment that includes NetJets, the fractional jet-ownership company, and aerospace parts manufacturer Precision Castparts. But Berkshire said sales at Fruit of the Loom and its business that supplies groceries to restaurants had declined. – Copyright The Financial Times Limited 2024
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