Warren Buffett, the over-90-year-old iconic investor known as the Oracle of Omaha and CEO and Founder of the investment holding company Berkshire Hathaway, has made a significant move by selling 60% of his shares in one of his favorite holdings, Apple. Once owning a whopping one billion shares, he now owns only 400 million shares. Additionally, Buffett has reduced another longstanding holding, Bank of America.
His company now holds a record amount of cash and cash-like investments, leading many to wonder what Buffett sees in the stock markets. Buffett’s right-hand man, Ajit Jain, who has been with him since 1986 and serves as his top investment officer, has also made notable stock market sells, including unloading Berkshire shares worth 139 million. Insiders are known to buy stocks when they believe the markets are favorable and sell when they fear adverse conditions.
While insider selling isn’t always tied to market conditions and can be due to personal financial needs, the substantial sell-offs by Buffett and Jain suggest more significant apprehension. It’s unlikely these transactions are for small personal purchases given their magnitude.
Buffett’s strategic share sell-off
Historically, Buffett, his company, and Jain have adhered to a strategy of buying great businesses and holding them “forever.” This makes their recent large-scale sales particularly noteworthy. Buffett has also been holding large amounts of Treasury Bills. Commonly known as T-Bills, these U.S. Government debt issuances are considered risk-free if held to maturity and have been yielding up to 5% or more annually due to recent Federal Reserve interest rate hikes.
Even with such solid returns, the decision to sell significant holdings in established companies like Apple and Bank of America raises questions. Stocks are considered overvalued by various standard metrics. According to Stansberry Research Digest newsletters, 19 valuation models suggest that stocks are the most expensive they have ever been.
While market predictability is a complex and often unreliable endeavor, it might be wise to consider the actions of notable investors like Warren Buffett. By understanding these moves and historical precedents, investors can better evaluate their own market strategies.
