OMAHA, Neb. — Billionaire Warren Buffett slashed Berkshire Hathaway’s massive Apple stake in a move that could prove unsettling for the broader stock market — both because Buffett is so revered and because there has been little positive financial news lately.
Just two years ago, Buffett called the stock one of the four giants of his conglomerate’s business alongside Berkshire insurance, utility and BNSF railroad businesses it owns. That gave investors the impression that Buffett might hold onto Apple indefinitely as he has with the Coca-Cola and American Express shares he bought decades ago.
However, he has trimmed the Apple stake over the past year and has recently sold off some of his stock in Charlotte-based Bank of America and Chinese EV maker BYD while doing very little buying.
As a result, Buffett now has nearly $277 billion in cash, up from a record $189 billion three months earlier.
Edward Jones analyst Jim Shanahan said, “This could alarm the markets, especially given the news from last week,” which included weak tech earnings, a disappointing jobs report and uncertainty about the future of interest rates.
Buffett has consistently lavished praise on Apple CEO Tim Cook, who attended Berkshire’s annual meeting in Omaha in May and talked about how consumers are feverishly devoted to their iPhones and don’t like to switch. He did trim more than 10% of Berkshire’s Apple stake in the first three months of this year when he sold off more than 116 million shares, but the sale was a much bigger move.
In a research note, Wedbush tech analyst Dan Ives said that he thinks “Buffett is a core believer in Apple, and we do not view this as a smoke signal for bad news ahead.” Apple remains the largest investment in Berkshire’s portfolio — more than double its Bank of America stake.
In Saturday’s report, Berkshire didn’t give an exact count of its Apple shares, but it estimated the investment was worth $84.2 billion at the end of the second quarter, even though shares soared over the summer as high as $237.23. At the end of the first quarter, Berkshire’s Apple stake was worth $135.4 billion. Shanahan estimates that Berkshire still holds about 400 million Apple shares.
Still, CFRA Research analyst Cathy Seifert said she views the Apple sale more as responsible portfolio management because the tech giant had become such a large portion of Berkshire’s holdings. It does look like Buffett may be preparing for a downturn.
“This is a company girding itself for a weaker economic climate,” Seifert said.
Berkshire reported a small drop in its bottom-line earnings because of a drop in the paper value of its investments. During the second quarter, the company earned $30.348 billion, or $21,122 per Class A share. That’s down from $35.912 billion, or $24,775 per A share, a year ago.
Buffett has long cautioned investors that judging Berkshire’s performance based on its operating earnings is better. Those figures exclude investment gains and losses, which can vary widely from quarter to quarter.
By that measure, Berkshire’s operating earnings grew more than 15% to $11.598 billion, or $8,072.16 per Class A share, from $10.043 billion, or $6,928.40 per Class A share, a year ago. Geico led the improvement of Berkshire’s businesses, while many of its other companies that are more sensitive to the economy reported lackluster results. The results easily topped the $6,530.25 earnings per share.
Berkshire owns various insurance businesses, BNSF railroad, several major utilities and a varied collection of retail and manufacturing businesses, including brands like Dairy Queen and See’s Candy.