In a move that will send shockwaves through markets, Warren Buffett’s Berkshire Hathaway has sold half its holding in Apple as part of a multi-billion-dollar sell-down from stock markets. This dramatically negative message to investors comes just as Wall Street has tanked.
Buffett and Berkshire’s move will have a dramatic impact on market sentiment Monday and this week, as it suggests a lack of confidence in the share markets by the world’s most followed investor, even as share prices hit a succession of new highs, especially in June.
The news, revealed in the company’s second-quarter earnings report, saw Berkshire’s cash float surge to a record US$276.9 billion (A$425 billion) by the end of June. This was up from the previous all-time high of US$189 billion at the end of March this year.
Berkshire has now been a net seller of stocks for seven quarters straight, but this selling accelerated in the three months to June with Buffett shedding more than US$75 billion in equities in the second quarter. That means Berkshire has sold more than US$90 billion worth of shares over six months, a significant vote of no confidence in Wall Street.
The selling by Buffett has continued into the third quarter in some areas, with Berkshire cutting its second-largest stake, Bank of America, for 12 days in a row over late July. Around US$3.8 billion worth of BoA shares were sold.
The report did not explain why Berkshire was cashing up by selling into a rising market—the best of all worlds.
Berkshire bought back just US$345 million worth of its own stock in the second quarter, significantly lower than the US$2 billion repurchased in each of the prior two quarters. The company buys back shares from long-standing shareholders known to Buffett.
For the second quarter, Berkshire’s operating earnings, which encompass profits from the company’s approximately 100 wholly-owned businesses, enjoyed a jump thanks to the strength of auto insurer Geico. Operating earnings were up around 15% at an all-time high of US$11.6 billion in the second quarter, from US$10 billion a year prior.
Geico reported a nearly US$1.8 billion underwriting gross profit in the three months to June, more than tripling the US$514 million from a year ago. BNSF rail turned in a steady result of US$1.6 billion, but Berkshire Energy, the 91%-owned utility business, saw earnings fall to US$326 million, nearly half of the US$624 million from the same quarter a year ago. BHE continues to face pressure for potential fire liabilities.
The statutory result, which takes in unrealized losses and gains from the company’s investments, fell to US$30.3 billion in the second quarter from US$35.9 billion in the same period a year ago.
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The sale of Apple shares will surprise the market and put the iPhone company’s shares under pressure. Up to Friday, they had weathered last week’s sell-off and had a solid rebound so far in 2024.
Apple shares were up 0.7% for the day and 1.17% for the week with a market value of more than US$4.4 trillion—an 18.4% gain year to date. That will not last as nervy investors follow Berkshire Hathaway out of the stock.
In fact, after a weak first quarter, Apple shares rebounded strongly in the three months to June, rising 23%—and Buffett and Berkshire hopped right in and took advantage by selling.
That was after Buffett had already trimmed the Apple stake by 13% in the first quarter.
Buffett’s company said in its earnings report that its holding in the iPhone maker was valued at US$84.2 billion at the end of June, suggesting it had been almost cut in half—around 49% of the March 31 stake was missing.
Even after the selling, Apple remains the largest stock stake by far for Berkshire.
Berkshire has also raised billions by selling most of its holdings in Chinese EV and battery group, BYD, this year to where it now held a stake of 4.9%—under the reporting level for purchases or sales. Analysts say Berkshire has probably sold out completely in the last couple of weeks.