Warren Buffett, arguably America’s most successful investor, is at it again. His recent moves in the stock market have investors paying close attention. Since 1965, Buffett’s calculated decisions have helped Berkshire Hathaway (BRK. A, BRK. B) nearly double the performance of the S&P 500.
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Buffett’s large investment in Apple (AAPL) has intrigued people for years. Berkshire Hathaway began buying AAPL shares in 2016, making the tech giant one of its largest holdings. Buffett has previously spoken favorably of the tech giant, calling it “a better company than other companies in Berkshire’s portfolio.” Despite those positive comments, recent moves suggest Buffett may be changing his strategy toward Apple.
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As reported by CNBC, Berkshire Hathaway will drastically reduce its stake in Apple from $905 million in December 2023 to $400 million by June 2024, a 55% reduction. This may not have been expected by anyone, as Buffett was a big fan of the tech giant.
Perhaps this is a case for the stock sale, which is based on Apple’s recent performance: The company posted June quarter sales of $85.8 billion, up 4.8% from a year earlier, but its outlook for the future is bleak.
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Revenues in China, a key market for Apple, plummeted 6% and the company’s operating profits worsened, falling 10%. The company lost its place among the top five smartphone companies in the country, while rival brands like Huawei and Xiaomi performed well. These issues, along with what some analysts consider to be a high valuation, may have prompted Buffett to rethink his stance.
Despite reducing Berkshire’s Apple holdings, Buffett remains bullish on another investment, Berkshire Hathaway. He has bought back $5 billion of Berkshire shares over the past three quarters and is optimistic about the company. “With its current business mix, I believe Berkshire should perform a little better than the average U.S. company,” he wrote in a recent shareholder letter.
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Berkshire Hathaway’s performance has been impressive, albeit up and down: In June, the company reported sales rose 1.2% to $93.7 billion and operating profit increased 16% to $11.6 billion.
The insurance group performed particularly well, with profits from underwriting and fixed-income investments rising 56%.But Berkshire’s GAAP net income fell 16% to $30.3 billion, and Buffett said investors should pay little attention to that figure because of volatility in unrealized gains and losses on its equity investments.
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Analysts have long projected Berkshire Hathaway’s operating profit to grow 10% in 2024 before declining 3% in 2025. With Buffett’s share-buyback program continuing, he would appear to be getting extremely high value in Berkshire Hathaway while reducing his exposure to other assets like Apple.
Berkshire Hathaway could be a godsend for investors looking for a safe, stable long-term investment, and if Warren Buffett continues to express strong faith in his company, it could be the green light for other companies to do the same.
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The article “Warren Buffett Declares Turnaround: Sell Apple Shares to Invest in This ‘Brilliant’ Giant Company — Here’s Why” originally appeared on Benzinga.com.
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