William Gallagher
Famed investor Warren Buffett cut his firm's Apple holdings by 13% in the first quarter of 2023, as analyst consensus was that the iPhone was seeing declining demand.
Buffett is not a long-term investor in Apple — his Berkshire Hathaway firm only started buying Apple stock in 2016 — but it became a particularly significant shareholder. Warren Buffett also taught both Steve Jobs and Tim Cook about the value of a company buying back its own shares, which it did again after its latest earnings report.
As first spotted by CNBC, however, Berkshire Hathaway's own Q1 earnings report reveal that it has cut its stake in Apple by 13% over the period. Apple remains Berkshire Hathaway's biggest holding, worth around $135.4 billion.
During the first calendar quarter of 2024, analysts consistently downgraded Apple, in particular because of falling iPhone demand in China.
JP Morgan, for instance, cut its target price and said that while Apple will get a boost from introducing AI features to the iPhone, it won't do so until 2025 and the iPhone 15. Morgan Stanley insisted that it remained bullish on Apple, yet also cut its stock price.
Apple's earnings report on May 2, 2024, did confirm that iPhone sales are notably down in China — but not nearly as bad as the up to 25% decline that was forecast by some. Partly because of the bad sales guesses by analysts baking in losses into the stock before the earnings, Apple's stock price rose sharply after the earnings report, based on the company's resilience with a mix of hardware and software, and the promise of AI features coming soon.
As a consequence, most analysts have reversed their opinion of whether investors should buy Apple stock. Morgan Stanley was the first to raise its target price again, although its new $216 figure is still down from earlier in the year.
There are signs, however, that Warren Buffett's strategy with Apple may not be related to short term issues with the shares and instead is part of the firm's move away from technology firms. The first calendar quarter of 2024 was the second quarter in a row where Berkshire Hathaway sold Apple shares.
In Q4 2023, the investor sold off 10 million Apple shares. That was estimated to be around 11% of its whole stake at the time.
Buffett has also cut Apple shares before, although in 2021 he said a recent round of selling shares had been "probably a mistake."
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Wesley Hilliard
Christine McKee
Andrew Orr
Andrew O'Hara
20 Comments
Half of Buffett portfolio is Apple stock. Yes I said half. That is amazing and there is no way you can’t not diversify away a bit. Way too much allocated to one stock and I’m sure Buffett heard this constantly from the new younger berkshire managers. Means nothing but that explains some of the price drop this year.
I’m assuming he put the proceeds towards treasuries. He seems to be stockpiling quite a bit of cash — makes sense given how expensive most share prices are. He will be ready to pounce once prices come down — and they will. I can’t see how rates being as high as they are won’t have an effect. Historically, rates held this high for this long has been a prelude to a recession. Inflation is still high, and government debt is off the charts — maybe Buffett sees this all coming to a head at some point soon.
Apple buying back up to 110 billion in stock is purely a play to bolster its EPS (earnings per share) going forward because they aren’t confident that earnings will rise
together with Tim Cook and other insiders selling some of their shares along with Warren Buffett selling 13% of his holdings all in the short timeframe doesn’t exactly look positive
Time will tell whether Apple can regain it’s position as #1
Since 2012, Apple has bought back shares worth $674.9 billion, mostly at a price well below where it’s currently trading, so in retrospect it looks like a pretty good use of the funds, especially since shareholders are taxed on the increased share value at capital gains rates, which (at least in the U.S) are very low. There have been cynics all along the way, of course, but if Apple were concerned about their pipeline and future prospects, they would not be working so aggressively towards a cash-neutral position.