Warren Buffett’s recent stock moves have sparked questions about what they might mean for the market and economy. Buffett’s Berkshire Hathaway has significantly reduced its holdings in Apple and Bank of America this year. The Apple position has roughly been halved, and recent sales in Bank of America have amounted to nearly $8 billion since mid-July.
However, the reality behind these moves is likely more complex and less alarming than some might think. Buffett has indicated in recent years that he doesn’t see many compelling values in the public market. The fact that he hasn’t made a significant purchase of an entire company in a while underscores the apparent lack of opportunities of the required size and valuation.
Private investor and longtime Berkshire shareholder Ed Borgato notes the trimming in Apple and Bank of America “does not reflect a macro view of any kind.” Instead, it’s about managing the size of those positions. Apple constituted about half of Berkshire’s investment book late last year, and Borgato suggests that Apple’s premium valuation against a slower growth rate made it prudent to sell.
Buffett’s recent stock adjustments
It’s hard to overlook that all this is occurring as Buffett, 94, prepares Berkshire to be run by his successors. At the annual shareholder meeting in May, Buffett revealed that his chosen successor as CEO – current vice chairman Greg Abel – will also oversee the investment side, signifying a shift in Buffett’s thinking. Berkshire’s profit-taking has come at a time when its own shares have outperformed the market and begun to look richly valued.
Since the bear market low of October 2022, Berkshire has tracked the iShares MSCI Quality ETF (QUAL) closely while outpacing the S&P 500. Meanwhile, Berkshire’s price-to-book-value ratio has climbed above 1.6, a level it has rarely surpassed in the past 15 years. The firm slowed its repurchase of shares in the latest quarter, with Buffett being notoriously selective about what he pays to buy back Berkshire equity.
Berkshire’s nearly $300 billion in cash acts as both a buffer and a burden. Buffett has spoken about his willingness to deploy this capital strategically. The ongoing adjustments and strategy signals from Berkshire suggest prudent portfolio management rather than a dire warning about the market’s immediate future.
