Warren Buffett, the CEO of investment giant Berkshire Hathaway, has reduced the company’s stock holdings, boosting its cash reserves to a record $277 billion.
Popular iPhone company Apple has seen the highest cut in the conglomerate’s stake but records show that the company has reduced its stock holdings in several other companies in 2024.
Who Is Warren Buffett?
Warren Buffett is a very popular name in the business world, and for good reason. He is a businessman and philanthropist who is considered to be one of the most successful investors the world has ever seen.
Nicknamed the “Oracle of Omaha,” Buffet has a net worth of $135 billion and is currently the 10th richest person in the world. Due to his stock holdings in top companies, he is also known as one of the best investors in the world.
What Do Holdings Mean in Stocks?
Stock holdings are simply the number of stocks or shares that a person, institution, or group of people own in a particular company. They make up a huge part of an investment portfolio and show how much stake a person or institution holds in a company.
This can increase in value over time, earning a huge profit for the stockholder. Investment companies are usually huge stockholders in many companies.
What Did Warren Buffett Do to Berkshire Hathaway?
Buffett is also the chairman and CEO of Berkshire Hathaway, an American multinational conglomerate holding company with its headquarters in Buffett’s hometown, Omaha, Nebraska.
Recently, the billionaire businessman made several headlines after helping the conglomerate’s cash hoard to increase from $189 billion in the first quarter of 2024 to a record $276.9 billion at the end of the second.
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Buffett Reduced Apple Stock
Berkshire Hathaway revealed that it recently sold almost half of its stock in Apple, causing a huge jump in the conglomerate’s cash reserves. It had about $140 billion in stock at the end of March but has now sold off a notable cinch, leaving its stake at $84 billion.
This sale was not surprising to many experts, as many reported that Buffett had been selling off small amounts of Apple stock since late last year.
Why Did Warren Buffett Sell Apple Stock?
There are many guesses about why Warren Buffett sold Berkshire Hathaway’s Apple stock, but none of them are verified. Some people believe that it is a sign that the company no longer believes in Apple’s growth in the coming years.
However, some believe it is only a routine cut. The conglomerate’s stake in Apple has grown over 900% since Buffett got shares in the company and this could just be a routine cut due to the growing stake.
Expert Opinions
According to Joe Gilbert, a senior portfolio manager at Integrity Asset Management, the cut in the iPhone maker’s stock is simply about risk management. “Buffett’s reduction of his Apple stocks is merely about risk management,” he said.
He explained further, saying, “If there were any concerns about the longer-term viability of Apple, Buffett would have exited the entire position. Similar to Berkshire’s other stock position reductions, Buffett has meaningful unrealized gains.”
Proof of Growing Investments
According to Brian Mulberry, a client portfolio manager at Zacks Investment Management, it is also possible that Berkshire is simply following a growing pattern among big investors.
It is possible that the company wants to see more proof of Apple’s AI investments to determine if they will pay off in the long run. Revenue growth is also quite important for an investor like Berkshire, and that could be the reason for the huge sales.
Berkshire Hathaway’s Stock
For the past seven quarters, Berkshire Hathaway has been focused on selling its stocks rather than majorly investing. Therefore, Tim Cook’s Apple is not the only big company that has had its stocks sold by the company.
Buffett shed more than $75 billion in equities in the second quarter of 2024 alone, and if the $15 billion shed in the first quarter is added to the total, the company has shed more than $90 billion in 2024.
Berkshire Hathaway’s Continuous Sales
What’s more, the company and Buffett do not seem to be stopping anytime soon. The selling of stock holdings continued in the third quarter of the year. According to several reports, Buffet has now trimmed some of Berkshire Hathaway’s second-biggest stake in Bank of America.
This has been happening for 12 consecutive days since the ending days of July. Therefore, it is clear that Buffett is shedding multiple stocks this year.
ALSO READ: Beyond Riches: Warren Buffett Reveals the One Thing More Valuable Than Money
Deploying Its Cash Reserves
At the annual Berkshire Hathaway meeting in May, Warren Buffett gave some insight into why the company has paused spending.
“We’d love to spend it, but we won’t spend it unless we think [a business is] doing something that has very little risk and can make us a lot of money,” he said at the event. “It isn’t like I’ve got a hunger strike or something like that going on. It’s just that…things aren’t attractive.”
What Is the Cash Holding of Berkshire?
The company’s second-quarter report showed many unexpected fluctuations. It only bought back $345 million worth of stock in the second quarter of the year, less than the $2 billion it bought in the two previous quarters.
Its earnings declined to $30.3 billion compared to $35.9 billion in the second quarter of 2023. Buffett also warned investors to be careful of “extremely misleading” fluctuations that may cause more losses.
Federal Reserve’s Interest Rates Play a Role
The S&P 500’s performance has also surged to record levels since 2022, as investors expect the Federal Reserve to try to reduce inflation in the country and avoid an economic recession.
Therefore, investors are trying to be careful while making their next moves. Many are also starting to question their shares and investments in the technology sector due to the budding rise of artificial intelligence.
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