By In the second quarter of 2024, Berkshire Hathaway nearly halved its stake in Apple, from $166.8 billion to $84.2 billion. This 49.4% reduction marks a turning point for the legendary investor, known for its long-term investment strategy. Despite this massive sale, Apple remains Berkshire Hathaway's largest holding.
Why this sale?
Firstly, Warren Buffett had already reduced his stake in Apple by 13% in the first quarter of 2024, citing tax reasons. He had suggested that selling some of his Apple shares could benefit Berkshire shareholders in the long term, especially if capital gains taxes were raised by the US government.
However, the scale of this sale suggests that there may be other motives. Apple shares soared 23% in the second quarter, reaching a new record high thanks to promising announcements about the company's future in artificial intelligence. This high valuation may have prompted Buffett to realize substantial gains.
An asset reallocation strategy
The sale of Apple shares is part of a broader asset reallocation strategy by Berkshire Hathaway. During the second quarter, the company offloaded over $75 billion worth of shares, taking its cash position to a record $277 billion (see image below). This accumulation of cash could be interpreted as preparation for future investment opportunities, or as a precautionary measure against a possible market correction. At the same time, Berkshire Hathaway also reduced its stake in Bank of America, selling $3.8 billion worth of shares in July. This sale, the first in years, follows a solid rise in the share price in the first half of 2024.
Source : Financial Times
Implications for the market
Warren Buffett's decision to sell a significant portion of his Apple shares has important implications for the market. As an influential investor, his shares are often seen as an indicator of the market's future direction. This massive sale could signal increased caution in the face of high valuations and a potentially vulnerable economy. Berkshire Hathaway 's quarterly report shows that the company dumped its shares just as the S&P 500 was hitting a record high, in anticipation of a soft landing for the US economy. However, this outlook was challenged by a weaker-than-expected July jobs report, which contributed to a wave of selling in the market.
The reduction of Berkshire Hathaway's stake in Apple marks a turning point in Warren Buffett's investment strategy. Although the exact reasons for the sale remain speculative, it is clear that Buffett is taking a cautious approach in the face of high valuations and an uncertain economy. This decision may prompt other investors to reassess their positions and adopt a similar strategy of asset reallocation. In any case, Buffett's shares will continue to be closely scrutinized by the financial markets.
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