Warren Buffett, the CEO of Berkshire Hathaway, has made some notable changes to the company’s investment portfolio in 2024. According to the latest financial reports, Buffett has significantly reduced Berkshire’s largest holding, Apple stock. Since 2016, Berkshire had invested around $38 billion in Apple shares, making it the most money the company has ever put into a single stock.
At the start of 2024, Apple accounted for about half of Berkshire’s entire portfolio value, around $170 billion. However, Berkshire sold 13% of its Apple position in the first quarter of 2024. It then offloaded another 49% in the second quarter and 25% more in the third quarter.
The company cited tax reasons for the initial sales. Berkshire also reduced its stakes in other stocks, such as Capital One Financial and Bank of America. It completely sold its positions in Paramount Global and Floor & Decor Holdings.
The conglomerate is now holding a record $325 billion in cash.
Buffett adjusts Berkshire’s Apple holdings
The S&P 500 has seen strong gains, rising nearly 25% this year after a 26% increase in 2023.
The index is trading at a price-to-earnings ratio of 25.7, which is 42% higher than its long-term average of 18.1. Apple, the largest company in the S&P 500, has a price-to-earnings ratio of 41.1, well above its 10-year average. While high valuations alone may not trigger immediate selling, Buffett has a duty to make decisions that benefit Berkshire’s shareholders. Taking some profits at these extreme valuations is considered prudent portfolio management.
Buffett has also paused Berkshire’s stock buyback program for the first time since 2018. In the third quarter of 2024, he did not authorize any share repurchases. This could be due to Berkshire stock itself being overvalued or a desire to keep cash on hand in case of a steep market correction.
Berkshire is allowed to buy back its stock as long as its cash and equivalents stay above $30 billion. With $325 billion currently available, there is plenty of room for future repurchases. These moves by Buffett might signal caution for the broader market.
While investors should not necessarily rush to sell their stocks, they should be prepared for a potential correction in the S&P 500 in the coming year.
