Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) has stunned investors by slashing its stake in Apple Inc. (AAPL) by almost 50% in the second quarter of 2024. The reduction lowers Berkshire’s Apple investment from $140 billion to $84 billion, though Apple remains the largest holding in its portfolio. This significant decrease is surprising given Buffett’s usual long-term investment strategy.
The move was disclosed in Berkshire Hathaway’s Q2 earnings report on Saturday. The company posted operating earnings of $11.6 billion, up from $10 billion the previous year, driven mainly by increased insurance underwriting and investment income.
Ongoing Divestments
Buffett has been gradually reducing his Apple holdings since the fourth quarter of 2023, selling approximately 10 million shares in Q4 followed by a 13% reduction in Q1. In addition, Buffett has been trimming his investment in Bank of America (BAC), which is Berkshire’s second-largest stock holding after Apple. During Q2, Berkshire Hathaway sold over $75 billion in equities and increased its cash reserves to a record $277 billion.
Possible Motivations Behind the Sale
Several factors might explain Buffett’s decision to cut Berkshire’s Apple stake. He has suggested that reducing his holdings could help shield Berkshire shareholders from potentially higher capital gains taxes in the future. Additionally, the reduction comes after a 23% surge in Apple’s stock price during the second quarter, driven by optimism around its artificial intelligence initiatives.
Buffett’s move may also be part of a broader strategy to maintain a well-diversified portfolio. He has previously cautioned against overconcentration in any single stock, and trimming Apple shares could be a way to mitigate investment risks.
Market Reactions and Future Outlook
Buffett’s substantial reduction in Apple shares, along with ongoing legal challenges, demand softness, and increased competition in China, may prompt investors to question the stock’s long-term growth potential. However, Apple’s stronger-than-expected Q3 performance and commitment to shareholder returns could serve as positive indicators.
Currently, Apple stock holds a Moderate Buy consensus rating, with 24 Buy, seven Hold, and one Sell recommendation. Analysts’ average price target of $248.59 suggests a 13.07% upside potential from current levels.
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