Buffett's Berkshire Defies Forecasts with $30B Profit, Slashes Apple Holdings by Half
Saturday, Aug 3, 2024 9:00 pm ET
2min read On the evening of August 3, Eastern Time, Berkshire Hathaway, led by renowned investor Warren Buffett, announced its second-quarter report, significantly surpassing market expectations. The report revealed that Berkshire achieved a net profit of $30.348 billion, compared to $35.912 billion in the same period last year, far exceeding the market's forecast of $17.786 billion.
At the end of the second quarter, Berkshire's cash reserves reached a record high of $276.9 billion, up from $189 billion at the end of the first quarter. The most startling revelation was Berkshire's near 50% reduction in Apple holdings, with the value of its Apple shares dropping to approximately $84.2 billion from $174.3 billion at the end of the first quarter. In addition to reducing its stake in Apple, the latest disclosures from the U.S. Securities and Exchange Commission (SEC) show Berkshire has also been heavily selling shares of Bank of America since mid-July.
The simultaneous divestiture of long-held stocks like Apple and Bank of America suggests that Buffett might be cautious of the high valuation of U.S. equities. Analyzing Berkshire's trading patterns from the fourth quarter of 2022 to the end of the second quarter of 2024, it's evident that, apart from adding to a few oil stocks, Berkshire has been a net seller of most stocks.
For the second quarter, Berkshire's investment income was $18.75 billion, and operating profits surged to $11.6 billion.
Specifically, Berkshire’s newly disclosed 10-Q report reveals that as of the end of the second quarter, the value of its Apple holdings stood at approximately $84.2 billion, down nearly 50% from $174.3 billion at the end of the first quarter. Berkshire now owns about 2.6% of Apple’s shares, valued at around $88 billion based on last Friday's closing price.
As of June 30, 2024, approximately 72% of the fair value of Berkshire's equity investments was concentrated in five companies: Apple ($84.2 billion), Bank of America ($41.1 billion), American Express ($35.1 billion), Coca-Cola ($25.5 billion), and Chevron ($18.6 billion). Previously, Berkshire reduced its Apple stock by about 13% in the first quarter, attributing it to tax considerations during its May annual meeting. Buffett indicated that minor Apple sales this year would benefit Berkshire’s shareholders long-term if the U.S. government raises capital gains taxes to address the rising fiscal deficit.
Nevertheless, the scale of Apple’s second-quarter reduction exceeded market expectations. Some market opinions suggest that the significant sale of Apple shares could be attributed to more than just tax reasons.
In addition to selling Apple shares, Berkshire has been actively selling its Bank of America shares since mid-July. Between July 17 and August 1, within 12 consecutive trading days, Berkshire sold approximately 90.42 million Bank of America shares, amounting to around $3.8 billion, reducing its stake by approximately 8.8%.
Prior market speculations suggested that Buffett's reduction in Bank of America shares might be a preparation for a potential shift in Federal Reserve monetary policy. However, with high valuations of U.S. equities likely playing a more significant role, Berkshire's recent trading patterns from the fourth quarter of 2022 to the end of the second quarter of 2024 show it has been a net seller of most stocks, except for some oil stocks.
At the end of the second quarter, Berkshire's cash reserves reached a historic high of $276.9 billion. In the shareholder meeting held in May, Buffett mentioned that there were not enough attractive targets to allocate this capital. "We want to spend this money, but we won't unless we believe that the things we need to do carry minimal risk and can bring us a lot of money," Buffett said at that time. He had hinted that Berkshire's cash reserves might reach $200 billion soon.
With the Federal Reserve raising interest rates continuously over the past two years, the yield on 10-year U.S. Treasury bonds has remained above 4% for the majority of this year. As of the time of writing, the 10-year Treasury yield stands at 3.792%, while the 1-year Treasury yield is as high as 4.597%. This suggests that Berkshire can still achieve substantial returns by investing in risk-free government bonds.
At the end of the second quarter, Berkshire's cash reserves reached a record high of $276.9 billion, up from $189 billion at the end of the first quarter. The most startling revelation was Berkshire's near 50% reduction in Apple holdings, with the value of its Apple shares dropping to approximately $84.2 billion from $174.3 billion at the end of the first quarter. In addition to reducing its stake in Apple, the latest disclosures from the U.S. Securities and Exchange Commission (SEC) show Berkshire has also been heavily selling shares of Bank of America since mid-July.
The simultaneous divestiture of long-held stocks like Apple and Bank of America suggests that Buffett might be cautious of the high valuation of U.S. equities. Analyzing Berkshire's trading patterns from the fourth quarter of 2022 to the end of the second quarter of 2024, it's evident that, apart from adding to a few oil stocks, Berkshire has been a net seller of most stocks.
For the second quarter, Berkshire's investment income was $18.75 billion, and operating profits surged to $11.6 billion.
Specifically, Berkshire’s newly disclosed 10-Q report reveals that as of the end of the second quarter, the value of its Apple holdings stood at approximately $84.2 billion, down nearly 50% from $174.3 billion at the end of the first quarter. Berkshire now owns about 2.6% of Apple’s shares, valued at around $88 billion based on last Friday's closing price.
As of June 30, 2024, approximately 72% of the fair value of Berkshire's equity investments was concentrated in five companies: Apple ($84.2 billion), Bank of America ($41.1 billion), American Express ($35.1 billion), Coca-Cola ($25.5 billion), and Chevron ($18.6 billion). Previously, Berkshire reduced its Apple stock by about 13% in the first quarter, attributing it to tax considerations during its May annual meeting. Buffett indicated that minor Apple sales this year would benefit Berkshire’s shareholders long-term if the U.S. government raises capital gains taxes to address the rising fiscal deficit.
Nevertheless, the scale of Apple’s second-quarter reduction exceeded market expectations. Some market opinions suggest that the significant sale of Apple shares could be attributed to more than just tax reasons.
In addition to selling Apple shares, Berkshire has been actively selling its Bank of America shares since mid-July. Between July 17 and August 1, within 12 consecutive trading days, Berkshire sold approximately 90.42 million Bank of America shares, amounting to around $3.8 billion, reducing its stake by approximately 8.8%.
Prior market speculations suggested that Buffett's reduction in Bank of America shares might be a preparation for a potential shift in Federal Reserve monetary policy. However, with high valuations of U.S. equities likely playing a more significant role, Berkshire's recent trading patterns from the fourth quarter of 2022 to the end of the second quarter of 2024 show it has been a net seller of most stocks, except for some oil stocks.
At the end of the second quarter, Berkshire's cash reserves reached a historic high of $276.9 billion. In the shareholder meeting held in May, Buffett mentioned that there were not enough attractive targets to allocate this capital. "We want to spend this money, but we won't unless we believe that the things we need to do carry minimal risk and can bring us a lot of money," Buffett said at that time. He had hinted that Berkshire's cash reserves might reach $200 billion soon.
With the Federal Reserve raising interest rates continuously over the past two years, the yield on 10-year U.S. Treasury bonds has remained above 4% for the majority of this year. As of the time of writing, the 10-year Treasury yield stands at 3.792%, while the 1-year Treasury yield is as high as 4.597%. This suggests that Berkshire can still achieve substantial returns by investing in risk-free government bonds.