Warren Buffett‘s Berkshire Hathaway (BRK.A) (BRK.B) surprised investors by reducing its stake in Apple (AAPL) by nearly 50% during the second quarter. The sale lowered Berkshire’s position in AAPL to $84 billion from $140 billion as of March 2024. While Apple remains Berkshire’s largest holding, the significant reduction raises questions, given Buffett’s preference to hold stocks for the long term.
Don't Miss our Black Friday Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
The unexpected move was revealed in Berkshire’s Q2 earnings release on Saturday. The company reported operating earnings of $11.6 billion, up from $10 billion last year, primarily driven by higher insurance underwriting and investment income.
Berkshire on a Selling Spree
It is worth mentioning that Buffett has been trimming its stake in AAPL since the fourth quarter of 2023. He sold about 10 million shares of Apple in Q4, followed by a 13% stake reduction in Q1.
Moreover, Buffett has been selling Bank of America (BAC) stock, which is Berkshire’s second-largest stock holding after Apple. In Q2, Berkshire sold over $75 billion in equities and boosted its cash reserves to a record $277 billion.
Possible Reasons for the Sale
Buffett’s decision to trim Apple could be influenced by several factors.
Buffett suggested that selling a portion of the tech giant’s stock could shield Berkshire shareholders from potentially higher capital gains taxes in the future. This might have played a role in Q2 as well.
Furthermore, the stake sale came after Apple stock surged 23% in the second quarter, fueled by optimism around its artificial intelligence (AI) initiatives. This share price gain could have encouraged Buffett to sell Apple shares.
Further, Buffett’s decision to reduce his stake in Apple might also be part of a broader strategy to manage Berkshire’s investment portfolio. He has noted that holding too much of one stock can lead to risky overconcentration. By trimming his holdings in Apple, Buffett is likely aiming to maintain a balanced and diversified portfolio.
Is Apple a Buy, Sell, or Hold?
Buffett’s dramatic move, coupled with Apple’s ongoing legal woes, softness in demand, and increased competition in China, is likely to raise doubts among investors about AAPL’s long-term growth potential. Nevertheless, its better-than-expected Q3 performance and commitment to return shareholders’ value could act as catalysts.
With 24 Buy, seven Hold, and one Sell recommendation, AAPL stock has a Moderate Buy consensus rating. The analysts’ average price target on Apple stock of $248.59 implies 13.07% upside potential from current levels.
