For years, Warren Buffett's Berkshire Hathaway has been one of the biggest owners of Apple common stock.
At the end of 2023, Berkshire (BRK.A) owned 907.6 million, or 5.7%, of Apple's (AAPL) shares outstanding. At the time, the shares were valued at an estimated $174.3 billion.
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Early this year, Berkshire Hathaway started to sell its Apple shares. As of Sept. 30, it had cut its stake by two-thirds.
It still has about 296 million Apple shares if you work the math in Berkshire's (BRK.B) third-quarter-earnings report.
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The quarterly report, released Saturday, valued the Apple holding on Sept. 30 at $69 billion, or about $233 per share.
Berkshire Hathaway has more than $320 billion of cash before taxes right now, a third of its total net worth, which it can deploy at any time. It can buy companies, it can buy stocks, it can retire its own shares.
The cash hoard also includes the proceeds from its sale of $9 billion of Bank of America (BAC) shares.
Buffett and the art of when to sell a stock
Berkshire Hathaway is not obligated to report all the trades it has made to reduce its Apple position.
In theory, selling the shares should reduce the stock price because more shares are on the market.
But the sales appear to have been done so carefully that Apple's share price rose from $192.53 on Dec. 31, 2023, to $233 by the end of the third quarter. For the year, Apple is up 15.8%.
Buffett won, and so did Apple holders.
Why is Buffett selling Apple stock?
Apple shares are rising and sport a 15.8% gain on the year. Plus, the Cupertino, Calif., tech giant has the world's top market capitalization: $3.37 trillion.
Related: Analysts revisit Apple stock price targets after earnings, iPhone 16 outlook
At Berkshire's annual meeting in May, Buffett himself cited tax concerns were playing a part. Berkshire's financial reports suggest its cost basis (what it paid for the shares) was $19.1 billion.
Berkshire made only minor adjustments to its stake over the years after assembling its position. It was Apple's third-largest holding.
So, potentially, Berkshire had then, and undoubtedly still has, a large capital gain on its books.
But even last spring Buffett thought Apple shares were getting too rich.
Don't pay too much for any stock
Another reason: Buffett and his investment managers are firm believers in buying what the late Charlie Munger, Buffett's great friend and closest adviser, once called "great companies at a great price."
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Munger, who died in 2023 at age 98, for years had lobbied Buffett to buy into Apple. Buffett resisted because tech companies worried him, but Munger kept arguing that Apple was — and is — as much a consumer company as a tech company.
However, the risks now may be too great for Buffett and his team.
The price-to-earnings multiple of the Standard & Poor's 500 is about 22 times projected earnings. It's about 29 times the last 12 months of earnings.
While Apple stock is selling at 26.7 times forward earnings, its market capitalization of $3.37 trillion may simply be too rich. And besides, taking profits isn't a sin.
One last possibility: Buffett turned 94 on Aug. 30, and he may want to be sure that Berkshire is in prime financial condition for Greg Abel, whom Buffett has named as his successor.
A sprawling conglomerate, Berkshire Hathaway has the seventh largest market cap among U.S. companies: about $974.3 billion as of Nov. 1.
The market cap topped $1 trillion on Aug. 28.
Its core business has been insurance (Geico and other companies). It also owns public utilities, furniture retailers, the BNSF Railway (the biggest U.S. railroad), real estate brokerages, See's Candies, and more.
But parking cash isn't a bad thing, especially now with bond yields rising ahead of the presidential election on Tuesday and the Federal Reserve meeting that starts on Wednesday.
In short, cash is king, especially when uncertainty reigns.
The 10-year Treasury yield on Friday was 4.397%, up from Thursday's 4.29%. It has jumped from 3.62% on Sept. 16, two days before the Federal Reserve cut its key Federal Funds Rate to 4.75% to 5.25% from a range of 5.25% to 5.5%.
Berkshire earnings fall in third quarter
Berkshire Hathaway reported earnings of $7,019 per Class A share, down from $7,437 a share a year earlier and below the consensus estimate of $7,335.
The results reflected $500 million in losses from Hurricane Helene and a $1.5 billion noncash currency loss due to the decline of the U.S. dollar. It also estimated losses from Hurricane Milton at $1.3 billion to $1.5 billion.
The Class A shares closed Friday at $678,000, up 0.2%. The shares are up nearly 25% this year.
The Class B shares were up 0.3% to $452.14. They're up 26.8% in 2024.
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