Warren Buffett’s Berkshire Hathaway Set to Slash Apple Stake in Second Quarter Earnings Report
Investors are eagerly awaiting Berkshire Hathaway’s second-quarter 10-Q form, set to be released on Saturday, Aug. 3, to see if CEO Warren Buffett has continued to trim the company’s massive Apple stake. In the first quarter, Buffett reduced the stake by 13% to about 789 million shares, sparking speculation that second-quarter sales could total 100 million shares or more.
The Apple holding, which represents over 40% of Berkshire Hathaway’s equity portfolio, is expected to be a focal point of the upcoming report. With a current market value of $172 billion, Apple is Berkshire Hathaway’s largest investment. The company holds about a 5% stake in Apple, making it one of the tech giant’s top shareholders.
Several factors suggest that Berkshire Hathaway may have continued to reduce its Apple stake in the second quarter. Firstly, Buffett indicated at the annual meeting in May that the company’s cash would likely reach $200 billion by the end of the quarter, necessitating equity sales to achieve this figure. Given Berkshire Hathaway’s earnings of around $10 billion per quarter, Apple is a likely candidate for a sizable equity sale.
Moreover, Buffett’s tendency to continue selling once he starts, as seen with other stocks like HP and Paramount Global, further supports the possibility of further reductions in the Apple stake. Additionally, Apple’s strong stock performance, trading above $200 in the second quarter, may have prompted Buffett to trim the position.
Buffett’s value investing approach also plays a role in the decision to potentially reduce the Apple stake. While he paid a low-teens price/earnings multiple for Apple during its accumulation phase, the stock now trades at 30 times projected earnings, double the ratio Berkshire Hathaway initially paid.
Furthermore, concerns about potential tax implications on Apple stock sales, particularly in the event of higher corporate tax rates following a Democratic win in November, could influence Berkshire Hathaway’s decision to trim the stake.
Overall, the upcoming Berkshire Hathaway earnings report is expected to shed light on the status of the Apple stake, with many anticipating another sizable reduction in the position. As investors await the release of the 10-Q form, all eyes will be on Berkshire Hathaway’s strategic moves regarding its Apple investment.
For more financial insights and analysis, contact Andrew Bary at andrew.bary@barrons.com.