Buffett Shifts Gears: Berkshire Hathaway Trims Apple Stake Amidst Record Cash Reserves and Rising Stock Prices
1min read Berkshire Hathaway, led by Warren Buffett, has continued to divest its position in Apple, marking a notable investment shift. In the third quarter, Berkshire reduced its Apple holdings by approximately 25%, following a reduction of nearly half in the previous quarter. Despite these sales, Apple remains Berkshire's largest investment, albeit the value of the holdings has decreased significantly to $69.9 billion from last year's $174.3 billion.
Buffett had previously signaled that Apple's first-quarter sales saw some tax-related influences, maintaining Apple as a pivotal component of Berkshire's portfolio. However, with Apple stock facing challenges like sluggish iPhone growth, increased regulatory scrutiny, and competitive pressure, particularly from Chinese manufacturers, the strategic divestment decision gains context. These challenges were highlighted by Apple's forecast of low single-digit sales growth during a crucial holiday season.
Buffett's long-time associate, Charlie Munger, who passed away in November 2023, was reportedly more comfortable with Apple's weight in their portfolio, leaving the possibility that Buffett's recent stock sales aim at rebalancing the investment mix. Analysts suggest the sales might partly be due to Apple's substantial share in Berkshire's overall portfolio, which some believe had grown disproportionately large.
Additionally, Berkshire's financial strategies this quarter also saw a record-setting cash reserve of $325.2 billion, indicating the firm is still cautious in deploying capital amidst volatile markets. Buffett emphasized the importance of maintaining substantial liquidity, only using it when opportunities arise with minimal risk and high gain potential.
Interestingly, Berkshire did not engage in any share repurchases in the third quarter, marking a first since the 2018 policy change which allowed for buybacks. This decision coincides with a 25% increase in Berkshire's stock price this year, elevating its market capitalization to approximately $974.3 billion.
These tactical movements by Berkshire underscore a broader approach by Buffett to maintain financial prudence and adapt to the dynamic financial landscape as he gears towards more diversified and strategic asset allocation.