Berkshire Hathaway Reduces Apple Stake, Holds on to Cash
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Berkshire Hathaway Reduces Apple Stake, Holds on to Cash

Everyone's favorite allocation reference point, Berkshire Hathaway reshuffles its major exposure.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Investors often gauge their exposure choices based on popular fund allocations. The problem is a 60-day deadline lag between their reports and current market sentiment. The most common is the 30-day reporting lag after the end of the quarter.

This leaves plenty of room for front-running stocks, as insiders could use confidential information to game the market. It also means the fund could have already unloaded certain stocks after the last report.

Such a scenario could play out between Berkshire Hathaway and Apple, among other stocks.

Is Apple (AAPL) Losing Buffett’s Favor?

On Saturday’s Berkshire Hathaway annual shareholder conference, Chairman and CEO Warren Buffett directly addressed the selling of ~116 million AAPL shares in Q1. This represents a 13% Apple exposure reduction, following the sale of ~10 million shares in Q4 ‘23, representing 1.09% of the Berkshire Hathaway stake.

This puts the total AAPL stake worth $135.4 billion to around 790 million shares, a significant cut from 905.5 million at the end of 2023, making 50.19% of the portfolio weight. Buffett hinted that the reduction was due to taxes potentially going up. Presumably, tax hikes would be used to patch up massive budgetary deficits amid sticky inflation, next to astronomical $34.7 trillion US debt.

“if I’m doing it at 21% this year and we’re doing it a little higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year”

Year-to-date, AAPL shares are down 2.7%, severely lagging behind other Magnificent Seven stocks like META (up 30.5%) and AMZN (up 23.3%) for the same period. As previously covered, Apple’s cancellation of its electric vehicle project and lackluster Vision Pro demand created a lack of excitement for the company.

Combined with stiff smartphone competition from China and an antitrust lawsuit, it seems as if the best Apple days are in the rearview mirror. Investors could only guess what the AAPL price would be now without the heavy reliance on Apple’s record-breaking stock buyback program.

In this light, Buffett may even reconsider his stance on the company, having called it one of “Our Four Giants” in February 2022. Back then, the Oracle of Omaha was pleased with Tim Cook’s aggressive buybacks, noting that “each 0.1% of Apple’s 2021 earnings amounted to $100 million”.

Warren Buffet’s Cash Hoarding

Alongside Coca-Cola (KO) and American Express (AXP), Apple (AAPL) remains Berkshire Hathaway’s most significant stake. Buffett considers AAPL shares “extremely likely” to hold this status by the end of the year.

More interestingly, Berkshire reported in the Q1 earnings that cash and cash equivalents ramped significantly to $36.16 billion from $27.3 billion in a year-ago quarter. Of that, $33.67 billion in cash reserves came from the insurance sector. Further, Berkshire’s cash holdings from insurance and other businesses, including U.S. Treasury equivalents ($156.2 billion), rose to $182.3 billion.

Amid this quarterly 12% cash hoarding uptick, Buffett foresees cash holdings to increase to $200 billion by the end of Q2. From an investing standpoint, holding that rapidly depreciating asset would warrant allocation into currency debasement hedges, like Bitcoin.

Bitcoin advocates often point out dilutive inflation as the main reason for gaining BTC exposure, which is up 50% YTD vs BRK.B stock at 13%. 

However, Warren Buffett remains a staunch Bitcoin opponent, saying that he wouldn’t buy the entire Bitcoin supply if it were priced at $25, which now has a market cap of $1.25 trillion.

“If you … owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it,”

Unlike farmlands and apartments, Buffett believes that Bitcoin “isn’t going to do anything.” For now, he doesn’t see any significant investing opportunities.

“We’d love to spend it but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money,”

Do you agree with Warren Buffett’s sentiment that Bitcoin has no purpose or use? Let us know in the comments below.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.