Buffett Trims Apple, Bank of America; Picks Two New Favorites

In the latest quarterly update, Berkshire Hathaway's investment moves reflect Warren Buffett's cautious stance amid high market valuations. The company's cash reserves reached a record $325.2 billion by the end of Q3, an increase of 17.4% from the previous quarter. This accumulation of cash aligns with Buffett's recent statements at the annual meeting, where he noted a lack of compelling investment opportunities in the current market.

Regarding its equity portfolio, Berkshire Hathaway significantly reduced its holdings in Apple and Bank of America. Apple, the largest holding company, saw its share in the portfolio drop from 30.09% to 26.24%. Bank of America's holding was reduced to 11.88% and continued to dip below the 10% threshold, which requires less frequent disclosure under SEC rules. Besides, Berkshire fully exited a position in Ulta Beauty, selling 96.5% of its stake after a disappointing earnings report from the beauty retailer, which led to a lowered full-year outlook.

In addition, Warren Buffett continued to increase its stake in SiriusXM, now owning 32% of the New York-based satellite radio company. Also, Berkshire Hathaway bought 3.6 million shares for roughly $97 million across four purchases from Wednesday to Friday.1 The purchases bring Berkshire's stake to nearly one-third of SiriusXM, according to a Securities and Exchange Commission filing.

However, Berkshire also made some new investments during the third quarter. The company initiated positions in Domino's Pizza and Pool Corporation, which had underperformed the broader market in recent months. Domino's saw a 6% gain in its stock price, while Pool's stock had declined by about 8%.

Berkshire's interest in these companies may be due to their relatively low valuations compared to their historical performance, reflecting Buffett's focus on finding value in less overheated sectors.
Berkshire's market activity, especially its ability to influence stock movements, highlights Buffett's continuing influence over investor sentiment. This shift also reflects Buffett's concern over current market conditions, particularly the high valuations in the technology and artificial intelligence sectors.

The S&P 500's price-to-earnings ratio is currently at 28, above its historical average, and the "Buffett indicator" - the ratio of U.S. stock market capitalization to GDP — has surged above 200, signaling a potential overvaluation in the broader market.

In summary, Berkshire Hathaway's investment strategy in Q3 underscores Buffett's cautious approach to the market, focusing on cash accumulation while selectively deploying capital into underpriced stocks. This pattern reflects a broader strategy of waiting for more favorable investment conditions amidst ongoing market uncertainty.