The Downsizing of Warren Buffett’s Apple Stake

Warren Buffett’s Berkshire Hathaway recently disclosed in its first-quarter earnings report that it had reduced its massive stake in Apple, marking the second consecutive quarter of downsizing. The conglomerate reported that its Apple bet was now worth $135.4 billion, representing a 13% decline in the stake.

During Berkshire’s annual meeting in Omaha, Buffett explained that the sale of Apple shares was largely motivated by tax reasons. He mentioned that with the possibility of higher tax rates in the future to address the growing U.S. fiscal deficit, he wanted to manage his tax obligations proactively. Despite the sale, Apple remained Berkshire’s largest holding at the end of the quarter.

Speculations arose that Buffett’s decision to reduce his favorite stake in Apple was due to valuation concerns. Apple’s stock had surged 48% in 2023, making it a significant portion of Berkshire’s equity portfolio. With shares trading at more than 27 times forward earnings, there were concerns about the stock’s growth potential.

Despite a recent announcement of a $110 billion share repurchase program, Apple had experienced a decline in overall sales and iPhone sales. The stock had dropped over 4% since the beginning of the year as investors questioned the company’s ability to reignite growth. Buffett’s move to trim the Apple position was not unprecedented, as he had made similar adjustments in the past.

Buffett’s interest in Apple was initially piqued by one of his investing managers, Ted Weschler or Todd Combs, who recommended the stock years ago. He had even referred to Apple as his second-most important business after Berkshire’s insurers. Despite the recent reduction in the stake, Berkshire remained Apple’s largest shareholder outside of exchange-traded fund providers.

Warren Buffett’s decision to cut Berkshire Hathaway’s Apple stake was a strategic move influenced by tax considerations and valuation concerns. As one of the most renowned investors in the world, Buffett’s actions in the market often attract significant attention and analysis. The downsizing of the Apple stake sheds light on his evolving investment strategy and his approach to managing a large and diverse portfolio.