3 key takeaways from Buffett's sale of Apple shares
This year's $Berkshire Hathaway-A(BRK.A.US$ $Berkshire Hathaway-B(BRK.B.US$ One of the most surprising news from the shareholders' meeting $Apple(AAPL.US$ It was a reduction in the company's position in stocks. The revelation that Berkshire's Apple stock is currently equivalent to 135.4 billion dollars means that Warren Buffett's company holds approximately 790 million shares, which is a decrease of about 13%.
When it comes to selling 100 million shares or more in a short period of time, the question naturally arises as to why. Buffett hinted that the sale was for tax reasons, probably in anticipation of future tax rate increases.
Nevertheless, the history of Berkshire and Apple provides valuable investment lessons, and investors should know three things about Berkshire's sale of Apple shares.
Apple is no longer undervalued
Most investors know Buffett has a tendency to seek bargains. When Buffett's investment manager first proposed the acquisition of Apple in 2016, PER for Apple shares almost never exceeded 20 times, and PER was traded between 12 times and 18 times.
Additionally, Berkshire purchased most of its shares from the second quarter of 2016 to the second quarter of 2018. At that time, the total market value was between $500 billion and $900 billion, but now it's $208 trillion. It may have been some time before that investment came to fruition, but Apple brought significant profits to Buffett's company.
Currently, Apple's PER is about 28 times, and last year it was often traded at a profit ratio of 30 times, and there is a possibility that this led to the decision to sell some shares.
It is important to have cash
Due to the sale of Apple, Berkshire's cash holdings increased from 168 billion dollars in the fourth quarter to 189 billion dollars. As a result, the liquidity position recorded a record high.
Looking at this in the big picture, there are only 50 companies with a total market value of over $189 billion traded on US exchanges. Apple itself has followed suit, and fair value liquidity is around 162 billion dollars.
This could lead to speculation about the short-term direction of the market and what Berkshire plans to do with this cash. Even if interest rates rise, storing this cash in short-term government bonds is probably not the company's long-term plan.
As mentioned above, Buffett likes to buy bargain items. The market's Syrah PER, which is the price divided by the 10-year average profit, is 34 times higher than the average until 1871, which is much higher than the average of 17 times.
This ratio indicates that the market is becoming more expensive, but it remains to be seen whether that means a short-term market slump. Even for experienced investors like Buffett, it's almost impossible to measure market timing. Nevertheless, even if more undervalued stocks increase due to a fall in stock prices, overall returns can be increased by securing cash that can be used when stock prices are low.
Apple is likely to remain a solid long-term investment
Furthermore, Buffett stated that there is a high possibility that Apple will maintain Berkshire's largest position even as of the end of 2024. In a sense, this doesn't say much about stocks owned by Warren Buffett. Even after the recent sale, Apple still holds approximately 40% of Berkshire's stock portfolio and is the second-largest holding $Bank of America(BAC.US$ It is well above about 12% of This means that there is a possibility that Berkshire will sell even more Apple shares and argue that this is a diversification move.
However, Apple CEO Tim Cook attended the recent Berkshire Hathaway shareholders' meeting and suggested that Cook continues to maintain a strong relationship with Buffett and his company.
Furthermore, Buffett is aware of the appeal of Apple and its products, which probably motivated him to buy Apple shares over the past decade. Therefore, there is a high possibility that Buffett will continue to maintain Apple's position even if the market slump is approaching.
Warren Buffett and Apple
At the end of the day, investors should not only stick to the long-term investment case for Apple stock, but also learn investment lessons from Berkshire and Apple's history.
As mentioned above, Berkshire bought most of Apple stock when it was sold at a low price. The lesson of looking for bargains was beneficial to Buffett and other investors. Cash positions that are growing at huge sums may or may not indicate a recession is imminent, but investors need to have cash they can act upon when such bargain sales arrive.
Finally, blue-chip stocks are usually excellent investment targets in both bull and bear markets. Weathering past bear markets has been beneficial to Apple investors, and they will probably continue to do so.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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