Warren Buffett purchased $345 million worth of Berkshire Hathaway shares in the June quarter of 2024. This brings the total stock buybacks to $2.6 billion year-to-date and nearly $78 billion since 2018. In the same quarter, Buffett sold 389 million shares of Apple.
He first invested in Apple in 2016, and it became the largest position in Berkshire’s portfolio by the end of 2017. Despite his admiration for Apple CEO Tim Cook, Buffett reduced the Apple stake by 13% in the March quarter and another 49% in the June quarter. The decision to sell Apple stock was partly due to an anticipated increase in the corporate tax rate.
Buffett believes higher taxes will be implemented to address the historic deficit run by the U.S. federal government in recent years. By selling Apple stock, Berkshire aims to avoid paying higher taxes on future investment gains.
Buffett increases Berkshire stock buybacks
Another reason for selling Apple is valuation. Wall Street expects Apple’s earnings to grow at 8.6% annually over the next three years, which makes its current valuation of 34.4 times earnings look expensive. Buffett shifted his focus to repurchasing Berkshire Hathaway shares.
The company’s stock repurchase program allows Buffett to buy back shares whenever he believes they are undervalued. Berkshire’s insurance business and prudent investment decisions by Buffett and his understudies, Todd Combs and Ted Weschler, set it apart. Berkshire is the world leader in insurance float, which refers to premiums collected that have not yet been paid out in claims.
Buffett has noted that Berkshire has paid “less than nothing” to accumulate float, allowing him to generate substantial value for shareholders. Wall Street expects Berkshire’s operating earnings to increase at 17% annually through 2027, making the current valuation of 23.3 times operating earnings reasonable. Patient investors may consider buying a small position in Berkshire, especially since Buffett is likely continuing share repurchases in the current quarter.
