Warren Buffett Explains Why Berkshire Reduced Its Big Apple Stake

Despite selling a portion of Berkshire’s Apple holdings, Buffett maintained that Berkshire’s cash position and diversified portfolio ensure the company's stability and continued growth. He stresse...
Warren Buffett Explains Why Berkshire Reduced Its Big Apple Stake
Written by Rich Ord
  • OMAHA, Neb. — Warren E. Buffett, the chairman and CEO of Berkshire Hathaway, presided over the company’s annual meeting on Saturday. At the meeting, Buffett offered insights into Berkshire’s recent reduction of its substantial stake in Apple. Speaking before thousands of shareholders in attendance, Buffett emphasized that the decision to sell was not a signal of lost confidence in the tech giant but rather a strategic move in the face of broader economic and tax considerations.

    During the first quarter of 2024, Berkshire Hathaway sold 115 million shares of Apple, its largest holding. Buffett, however, reassured investors that despite the sale, Apple would remain Berkshire’s largest common stock investment. “We have sold shares, and I would think it extremely likely that at the end of the year, Apple is still our largest common stock holding,” Buffett stated.

    Apple Remains a Core Holding

    Sherman Lamb, a 27-year-old Class B shareholder from Malaysia, noted that Buffett had excluded Apple from the list of Berkshire’s long-duration ownership positions, which included Coca-Cola and American Express. In response, Buffett reiterated Berkshire’s confidence in Apple, emphasizing that it remains a core business for the conglomerate.

    “We look at Coca-Cola, American Express, and Apple as businesses,” Buffett explained. “There’s a difference in tax factors, managerial responsibility, and other aspects, but we always look at every stock as a business.” He added that unless extraordinary circumstances arise, Berkshire will continue to hold substantial positions in Apple, American Express, and Coca-Cola for the foreseeable future.

    Strategic Cash Positioning and Economic Outlook

    The decision to reduce Berkshire’s Apple stake aligns with Buffett’s broader strategy of building cash reserves amid economic uncertainties. The legendary investor highlighted that holding cash is advantageous when considering alternatives in the equity markets and the current global economic landscape.

    “When I look at the alternatives available in the equity markets and the global situation, we find holding cash quite attractive,” Buffett said. He noted that Berkshire doesn’t attempt to predict market movements or follow technical indicators, but instead focuses on assessing stocks as businesses and deploying capital accordingly.

    Tax Considerations and Federal Policy Changes

    Buffett also delved into the sale’s tax implications. Berkshire Hathaway paid a 21% federal tax rate on the gains from its Apple stake reduction, a significant decrease from the 35% rate of past years. Buffett remains optimistic about Berkshire’s future tax contributions despite paying substantial taxes.

    “We don’t mind paying taxes at Berkshire, and we’re paying a 21% federal rate on the gains we’re taking in Apple,” Buffett noted. “It doesn’t bother me to write that check.”

    Buffett also acknowledged the potential for higher taxes given current fiscal policies. “Something has to give, and I think higher taxes are quite likely,” he said. “The government owns a part of the earnings of our businesses. They don’t own the assets but a percentage of the earnings.”

    Optimistic Outlook for Apple and Berkshire’s Portfolio

    While Berkshire reduced its Apple holdings, Buffett emphasized that the tech giant remains a valuable business. He noted that Apple’s services and ecosystem make it an exceptional company with a strong competitive edge.

    “Apple is a wonderful business, and we will own Apple, Coca-Cola, and American Express when Greg [Abel] takes over this place,” Buffett said, referring to Berkshire Hathaway’s vice-chairman.

    Despite selling a portion of Berkshire’s Apple holdings, Buffett maintained that Berkshire’s cash position and diversified portfolio ensure the company’s stability and continued growth. He stressed that the sale was driven more by prudent portfolio management than concerns about Apple’s prospects.

    “We think it’s appropriate that a country that has been as generous to our owners deserves that we pay substantial federal income taxes,” Buffett said, noting that Berkshire sent over $5 billion to the U.S. federal government last year.

    Conclusion: A Simple but Effective Strategy

    Reflecting on Berkshire’s overall investment approach, Buffett highlighted the importance of viewing stocks as businesses and avoiding market speculation. “Most things, if you keep working harder, you learn a little more math or physics,” Buffett said. “But with investments, you don’t have to do that.”

    He credited Benjamin Graham’s The Intelligent Investor for helping shape his investment philosophy. “If you look at stocks as businesses and treat the market as something that’s there to serve you rather than instruct you, you’ll do much better over time.”

    Despite reducing Berkshire’s Apple stake, Buffett remains confident in the company’s long-term strategy and core holdings. “We will end up, unless something dramatic happens, with Apple as our largest investment.”

    In his customary candid and measured style, Buffett reassured Berkshire shareholders that their investments are in good hands, even amid the uncertain economic climate.

    Get the WebProNews newsletter delivered to your inbox

    Get the free daily newsletter read by decision makers

    Advertise with Us

    Ready to get started?

    Get our media kit