Warren Buffett’s Berkshire Hathaway halves stake in Apple

In the second quarter, Warren Buffett reduced Berkshire Hathaway’s stake in Apple by about 50% and disclosed a record cash reserve exceeding $270 billion as of the end of June. This move has fueled investor anxieties about a potential recession.

At the end of the second quarter, Apple continued to be Berkshire Hathaway’s largest stock position, valued at $84.2 billion, though this was a decrease from $174.3 billion at the close of 2023. Warren Buffett began selling Apple shares in the fourth quarter of last year, with the pace of sales increasing throughout 2024.

During Berkshire’s annual meeting in May, Buffett spoke highly of Apple’s business prospects, suggesting it was likely to remain Berkshire’s top position by the end of 2024 and would probably continue to be held even after he steps down.

Buffett’s choice to scale back Berkshire’s Apple investment offers valuable insights for individual investors managing their own portfolios. Here are the key lessons to consider.

The Apple share sale

Warren Buffett’s Berkshire Hathaway unexpectedly reduced its massive Apple stake by nearly 50% last quarter, a surprising move from the famously long-term-oriented investor.

In its earnings report, the Omaha-based conglomerate revealed that its investment in Apple was valued at $84.2 billion at the end of the second quarter, indicating that Buffett had sold just over 49% of the tech giant’s shares. Despite the reduction, Apple remains by far Berkshire's largest stock position.
The sale of Apple shares is part of a larger trend of divestment by Buffett during the second quarter. Berkshire Hathaway offloaded over $75 billion in equities during this period, boosting its cash reserve to a record $277 billion.

Buffett had already reduced Berkshire’s Apple stake by 13% in the first quarter and suggested at the annual meeting in May that this was partly for tax reasons. He explained that selling “a little Apple” this year could benefit shareholders in the long run if future U.S. tax policy increases capital gains taxes to address a growing fiscal deficit.

Following a drop in the first quarter due to worries about lagging in artificial intelligence innovation, Apple shares surged 23% in the second quarter, reaching a new high. This rebound came as the company provided investors with more insights into its future plans for artificial intelligence.

Why did the selling happen?

The reasons behind Buffett’s decision to reduce Berkshire Hathaway’s Apple stake, which was initially acquired over eight years ago, remain unclear. It could be due to company-specific issues, market valuation concerns, or portfolio management strategies, as Buffett generally avoids allowing any single investment to become too dominant. At one point, Berkshire's Apple investment was so substantial that it represented half of its equity portfolio.

For most of his career, the 93-year-old investor largely steered clear of technology companies until Apple came along. Berkshire Hathaway began purchasing Apple stock in 2016, driven by Buffett’s investment lieutenants, Ted Weschler and Todd Combs. Over time, Buffett developed a strong affinity for Apple, significantly increasing the stake and making it Berkshire’s largest investment, while also ranking it as the second-most important business after his portfolio of insurers.

Recently, Buffett has been trimming his major holdings. He has started to reduce his position in his second-largest investment, Bank of America, offloading $3.8 billion in bank shares following a 12-day selling spree.

Apple shares drop nearly 5%

In its earnings report, Berkshire Hathaway revealed that its Apple investment was valued at $84.2 billion at the end of the second quarter, showing that Warren Buffett sold just over 49% of the tech stake. Apple shares fell 4.8% on Monday, having dropped as much as 10% earlier in the day. The global stock markets are teetering on the edge of a significant correction, driven by worries about an economic slowdown.

Berkshire's investment in Apple became so substantial that it once represented half of its equity portfolio, suggesting that the recent sales could be driven by portfolio management considerations. In the second quarter, Apple shares soared 23% to a new record high, fueled by renewed optimism about its advancements in artificial intelligence.

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