Warren Buffett's Strategic Stock Sales: The $133 Billion Question

Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, has made headlines this year by selling over $133 billion worth of stocks. This significant move has raised eyebrows among investors, but two notable exceptions shed light on Buffett's long-term investment strategy. Let's delve into the reasons behind these sales and the companies Buffett isn't selling, offering valuable insights for investors.

First, Buffett's Apple sale, totaling $70 billion this year, might be influenced by potential tax rate increases. With the current 21% rate set to expire in 2025, a Republican White House and Congress are likely to extend it. However, Buffett is locking in gains at a relatively lower tax rate, suggesting he sees Apple's stock price as relatively high compared to its intrinsic value. Despite this, Apple remains Berkshire's largest equity position, valued at $70 billion or over 23% of the total portfolio.

Second, the legacy media industry's shift towards streaming has affected Buffett's investment in Paramount Global. Legacy media companies like Paramount have had to adapt to cord-cutting and invest in streaming content libraries, which can weigh down operating results. Buffett noted during Berkshire Hathaway's annual shareholder meeting that he had exited the stake at a loss.

Buffett's decision to sell these specific stocks can be attributed to several key factors. First, he has been a vocal critic of the current tax laws, which he believes will revert to a less favorable level after the current tax laws expire at the end of 2025. In anticipation of this, Buffett has taken the opportunity to lock in the 21% tax rate on over $97 billion worth of capital gains so far this year. Second, Buffett has hinted that investors will appreciate his company locking in these gains at a relatively lower tax rate in hindsight. However, it's important to note that Buffett hasn't sold every position in the portfolio with substantial long-term capital gains, suggesting that his recent sales are based on his belief that Apple and Bank of America are priced relatively high compared to their intrinsic values.



These sales reflect a strategic pivot towards safety and yield, with Berkshire Hathaway's portfolio now holding over $157 billion in short-term Treasury bills, offering yields up to 4.65%. Despite these sales, Buffett remains invested in two companies: American Express and Coca-Cola, which contribute 15.44% and 10.79% to his portfolio respectively. These holdings reflect his long-term commitment to stable, predictable businesses with strong brands and enduring business models.

In conclusion, Warren Buffett's stock sales this year, totaling $133 billion, are a reflection of his strategic approach to investing. By locking in gains at a relatively lower tax rate and divesting from companies like Apple and Paramount, he demonstrates a focus on long-term growth and stability. As investors, we can learn from Buffett's approach by focusing on a company's fundamentals and management, rather than short-term market fluctuations, and favoring stable, predictable businesses with strong brands and enduring business models.