OMAHA, Neb. (AP) — Billionaire Warren Buffett has pared back Berkshire Hathaway’s large holdings of Apple stock, a move that could send shivers down the stock market as a whole, not only because Buffett is highly respected but also because there has been little positive financial news recently.
Just two years ago, Buffett called Apple one of the conglomerate’s four major businesses, along with insurance, utilities and the BNSF railroad business, all of which are wholly owned by Berkshire Hathaway, giving investors the impression that he might hold Apple shares indefinitely, just as he did with the Coca-Cola and American Express shares he bought decades ago.
But he has reduced his holdings in Apple over the past year and recently sold some shares in Bank of America and Chinese electric vehicle maker BYD, but has made few purchases.
As a result, Buffett’s cash holdings have now grown to about $277 billion, up from an already record $189 billion just three months ago.
“Given last week’s news, this could be a cause for caution in the market, especially given weak technology earnings, disappointing employment data and uncertainty about the future of interest rates,” Edward Jones analyst Jim Shanahan said.
Buffett has consistently praised Apple Chief Executive Tim Cook, who appeared at Berkshire’s annual meeting in Omaha in May and spoke about consumers’ enthusiasm for the iPhone and their unwillingness to switch. The sale disclosed Saturday was a bigger move than Buffett’s sale of more than 116 million shares in the first three months of the year, reducing Berkshire’s Apple stake by more than 10%.
“Buffett is a true believer in Apple and doesn’t see this as a harbinger of bad news,” Wedbush technology analyst Dan Ives said in a research note. Apple remains the largest holding in Berkshire’s portfolio, more than double its holding in Bank of America.
Ives said he believes the recent sell-off in tech stocks is just a temporary distraction from the industry’s longer-term strength.
Berkshire did not disclose the exact number of Apple shares it owns in its Saturday filing, but estimated its investment was worth $84.2 billion at the end of the second quarter, even as the stock price soared to $237.23 over the summer. Berkshire’s Apple stake was worth $135.4 billion at the end of the first quarter.
Shanahan estimates that Berkshire Hathaway still owns about 400 million Apple shares.
Still, CFRA Research analyst Cathy Seifert said she sees the Apple sale as responsible portfolio management because it made up a big chunk of Berkshire’s holdings, but it also seems like Buffett is preparing for a downturn.
“The company is preparing for a downturn in the economic climate,” Seifert said.
Berkshire reported a slight decline in its bottom line due to a decline in the book value of its investments. The company said it earned $30.348 billion, or $21,122 per Class A share, in the second quarter, down from $35.912 billion, or $24,775 per Class A share, in the same period a year ago.
Buffett has long warned investors to judge Berkshire’s performance by looking at the company’s operating profits, because that figure excludes investment gains and losses, which can fluctuate wildly from quarter to quarter.
On this basis, Berkshire’s operating income rose more than 15 percent to $11,598 million, or $8,072.16 per Class A share, from $10,043 million, or $6,928.40 per Class A share, a year earlier. Geico led Berkshire’s improvement, but many other cyclically sensitive companies reported lackluster results.
The results beat the $6,530.25 earnings per share forecast by four analysts surveyed by FactSet Research.
Berkshire owns a variety of insurance businesses, along with the BNSF Railroad, several large utility companies, and a variety of retail and manufacturing businesses, including brands like Dairy Queen and See’s Candies.
