Warren Buffett Declares Shift: Selling Apple Stock To Invest In This 'Magnificent' Megacap – Here's Why

Warren Buffett, arguably America’s most successful investor, is at it again. His latest moves in the stock market have captured the attention of investors. Under his control since 1965, he has led Berkshire Hathaway (BRK. A, BRK. B) to nearly double the performance of the S&P 500 with his calculated decisions.

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Buffett’s large stake in Apple (AAPL) has been a source of intrigue for years. Berkshire Hathaway began buying AAPL shares in 2016, and the technology giant became one of its largest holdings. Buffett previously had nice things to say about the technology giant, referring to it as a “better business” than other companies in Berkshire’s portfolio. Despite those positive comments, recent moves suggest Buffett is changing his strategy with Apple.

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According to a report by CNBC, Berkshire Hathaway drastically reduced its stake from 905 million in Apple as of December 2023 to 400 million by June 2024, a 55% decline. Nobody might have expected this since Buffett has been a big admirer of the tech giant.

Perhaps this carries the sell-off reasoning toward Apple’s recent performance. The company still posted revenues of $85.8 billion in the June quarter – 4.8% above the same period last year – but the future outlook was grim. 

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Sales on the Chinese market, a key market for Apple, plummeted by 6%, and the company’s operating income fared even worse with a 10% decrease. It lost its previous position in the top five smartphone companies within China, while competitive brands such as Huawei and Xiaomi fared very well. These problems and a valuation that some analysts believe appears stretched may have prompted Buffett to reassess his stance.

Despite trimming Berkshire's stake in Apple, Buffett remains bullish on another investment: Berkshire Hathaway. He has repurchased $5 billion of Berkshire shares in the last three quarters, indicating a bright outlook. “With our present mix of businesses, Berkshire should do a bit better than the average American corporation,” he wrote in a recent shareholder letter.

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Berkshire Hathaway’s financial results have been outstanding despite its ups and downs. In June, the company reported a 1.2% revenue gain to $93.7 billion and a 16% rise in operating earnings to $11.6 billion. 

The insurance group did particularly well, with earnings from underwriting and fixed-income investment up 56%. However, Berkshire’s GAAP net income dropped by 16%, to $30.3 billion, a number Buffett has called one that investors should pay very little attention to because of the volatility of unrealized gains and losses on stock investments.

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Analysts have long forecast Berkshire’s operating earnings to increase 10% in 2024 and then reduce by 3% growth in 2025. With Buffett’s ongoing buyback program, this would have given the appearance that he is getting extreme value for Berkshire Hathaway, even as he reduces his exposure to other assets, such as Apple.

Berkshire Hathaway could very well be a godsend for investors seeking a safe and stable long-term investment. If Warren Buffett continues to express so much faith in his own company, this might well be a green light for others to do the same.

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