What Warren Buffett’s $100 billion Apple stock offload is telling us

Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) has made another significant reduction in its Apple (NASDAQ: AAPL) holdings, marking four consecutive quarters of sell-offs in its largest equity stake. 

According to Berkshire’s Q3 2024 earnings report, the Omaha-based conglomerate held $69.9 billion in Apple shares at the end of September, a stark decrease from its peak value of $174.3 billion in late 2023.

The recent sale trimmed Berkshire’s Apple stake by nearly 25%, reducing it to approximately 400 million shares. This downsizing follows an even larger reduction in the second quarter, where Berkshire offloaded over a third of its position in the tech giant. 

The value of Berkshire’s stake dropped sharply, from $135.4 billion in Q1 to $84.2 billion in Q2, highlighting that Warren Buffett’s Berkshire Hathaway has offloaded nearly $100 billion worth of Apple stock over the last two quarters.

Slowed buybacks amid record cash reserves

Berkshire’s significant Apple stock sale aligns with a broader trend of liquidating high-value positions, notably including a $9 billion reduction in Bank of America (NYSE: BAC) shares. 

Altogether, Berkshire sold approximately $36 billion in equities in Q3, largely comprising Apple and Bank of America, swelling its cash reserves to an unprecedented $325.2 billion.

Analysts speculate that Buffett’s recent sales may be due to premium valuations, as Apple is currently trading at 31 times its projected earnings, a forward P/E ratio of 30.20, according to StockAnalysis. 

This elevated multiple reflects strong investor optimism for Apple’s growth but also indicates that the stock is priced at a premium relative to expected earnings.

Additionally, Buffett hinted earlier this year that he might be securing profits ahead of potential capital gains tax hikes, a consideration he raised at Berkshire’s annual meeting in May. 

With Apple once comprising half of Berkshire’s equity portfolio, this shift may also reflect a need for diversification within the conglomerate’s holdings.

While Buffett has historically lauded Apple as one of Berkshire’s “most important assets,” these recent moves may suggest a more tempered stance toward tech stocks.

Cautious buyback strategy amid strong stock performance

Alongside its Apple divestitures, Berkshire paused its share buybacks in Q3, following a significant decrease in repurchases earlier this year. 

After spending only $345 million on buybacks in Q2, down from $2 billion per quarter in prior quarters, Berkshire refrained from buybacks in Q3. 

Nevertheless, Berkshire’s Class A shares have risen 25% in 2024, outperforming the S&P 500’s 20% return. This buyback pause, coupled with the stock’s strong performance, suggests Berkshire is maintaining capital reserves amid economic uncertainties.

While some investors might find Buffett’s Apple stake reduction concerning, it doesn’t necessarily indicate a loss of confidence in the tech giant. 

Apple remains Berkshire’s largest single investment by market value, reflecting Buffett’s longstanding appreciation for Apple’s brand loyalty and customer base. 

His recent strategy appears to align with his conservative investment philosophy, focusing on prudent capital allocation while preserving Berkshire’s long-term growth potential.