Berkshire Earnings Fall, Warren Buffett Slashes Apple Stake Again

Berkshire Hathaway's operating profits fell 7.9% in Q4 2022, partly due to inflationary pressures. Meanwhile, Warren Buffett continued slashing his stake in Apple, reducing it by another 3.5% in Q3 2022. This article explores the impact of these developments on Berkshire's portfolio and the broader investment landscape.

Berkshire Hathaway's operating earnings dropped to $6.7 billion in Q4 2022, down from $7.285 billion in the same period last year. Inflationary pressures weighed on the conglomerate's businesses, with earnings from its railroad, utilities, and energy business falling 12.3% to $2.241 billion. The insurance-underwriting business earned $372 million, an improvement from the $299 million loss in Q4 2020 but still below expectations.


Warren Buffett's Apple stake reduction has significantly impacted Berkshire's portfolio diversification. After a 67.2% cut since Q3 2023, Apple's stake is now 67.2% smaller, allowing Berkshire to diversify its portfolio and reduce concentration risk. This reduction also provides Buffett with ample liquidity for future investments, with Berkshire's cash hoard reaching $325.2 billion in Q3 2024.


Buffett's Apple stake reduction could have significant tax implications for Berkshire Hathaway and its shareholders. By selling Apple shares, Berkshire realizes capital gains, which are taxable at the corporate level. In 2024, the U.S. corporate tax rate is 21%, so Berkshire will pay $14.3 billion in taxes on the $69.9 billion sale. Additionally, if Buffett's sales are considered a distribution, shareholders may face capital gains tax on their proportionate share of the sale. However, if the sales are not considered a distribution, shareholders' tax basis in their Berkshire shares will be adjusted, potentially reducing their future capital gains tax liability.

Buffett's Apple stake reduction aligns with his long-term investment strategy, focusing on value and risk management. By reducing the stake, Buffett is diversifying and managing risk, as the stake had grown too large, reaching half of Berkshire's equity portfolio. This move allows Berkshire to explore new investment opportunities or acquisitions, potentially in sectors like utilities and renewable energy, which align with the author's investment preferences.

In conclusion, Berkshire Hathaway's earnings fall and Warren Buffett's Apple stake reduction have significant implications for the conglomerate's portfolio and the broader investment landscape. As Buffett continues to manage risk and explore new investment opportunities, investors should consider the benefits of dividend stocks over speculative ventures like AI, focusing on stable profits and cash flows. By adopting an income-focused strategy, investors can secure steady returns and capitalize on undervaluations created by market perceptions.