Warren Buffett, the CEO of Berkshire Hathaway, is known as one of the greatest investors of all time. He believes in investing in funds that mirror America’s economic growth. However, even with a roaring bull market this year, Buffett has pulled back on buying stocks.
Berkshire Hathaway has been a net seller of equities. Investments in equity securities on Berkshire’s balance sheet declined by $69 billion, while investments in Treasury bills surged by $105 billion. This indicates a shift towards safer assets.
Some analysts see these moves as signs of Buffett’s caution about the current market scenario. Stocks are currently expensive by historical standards, and Buffett has often lamented high valuations. Berkshire’s decision to sell much of its stake in Apple has been particularly surprising.
Buffett has praised the tech giant multiple times. However, Berkshire’s sales of some of its Apple stock meant it missed out on billions in gains the stock made subsequently. Berkshire began purchasing Apple stock in 2016 and, at one point, owned roughly $175 billion worth of the iPhone maker.
Buffett’s contrarian Apple stock move
However, the company has sold stock over the last three quarters, up to the second quarter of 2024. Using quarter-end share prices for each of these sales, it’s estimated that Berkshire has missed out on roughly $16 billion in gains due to the timing of the sales.
Despite the reduction in its Apple holdings, shares of the tech company have continued to rally to new all-time highs. Buffett has not provided extensive commentary on the reasons behind cutting Berkshire’s exposure to Apple. He did reference potential risks related to an increase in the capital gains tax rate at the Berkshire shareholder meeting in May.
Berkshire’s sales of Apple, and to a lesser extent Bank of America, appear to be mistakes given current stock market levels. However, Buffett is known for his contrarian thinking. He famously said, “Be greedy when others are fearful, and fearful when others are greedy.”
Given that the S&P 500 recently posted its best performance in the first nine months of the year in nearly three decades, it’s understandable for Buffett to adopt a cautious stance.
However, there are several indications that the bull market may have more room to run. We will need to wait a few more weeks to see if Berkshire continued to sell Apple stock in the third quarter. For now, the decision appears to be a costly mistake, but with Buffett’s track record, only time will tell if his cautious approach will ultimately prove wise.
Warren Buffett’s recent stock moves, especially the sale of Apple shares, have sparked debate among investors and analysts. While it appears costly now, Buffett’s history of contrarian moves suggests there may be more to these sales than meets the eye.
