Neuberger Berman Senior Research Analyst Dan Flax predicts earnings for big tech companies and which stocks are well-positioned.
Warren Buffett’s Berkshire Hathaway The company plans to sell about half of its Apple shares, increasing its cash holdings to about $277 billion, according to figures released on Saturday.
Berkshire’s quarterly report It suggests that the 93-year-old Buffett, one of the world’s most respected investors, is growing wary of stock market valuations that are too high, or that the U.S. economy as a whole may be in a precarious position.
Friday’s stock market sell-off came on the back of Thursday’s weaker-than-expected jobs report, which stoked concerns that the economy may be heading toward a recession and that the Federal Reserve may have waited too long to cut interest rates in an attempt to achieve a “soft landing” from the inflation cycle.
“Looking at the big picture for Berkshire and the macroeconomic data, the safe conclusion is that Berkshire is on the defensive,” said Cathy Seifert, an analyst at CFRA Research who has a Buy rating on Berkshire.
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Warren Buffett’s Berkshire Hathaway increased its cash holdings to a new record of $277 billion in the latest quarter. (Kevin Dietsch/Getty Images)
Dan Ives, managing director of equity research at Wedbush Securities, said: Apple remains Berkshire’s largest holding The company’s reduction in investments in big tech companies doesn’t necessarily bode well for bad economic news.
“Apple remains Berkshire’s largest holding today, more than double that of the next-largest holding, Bank of America, at roughly $41 billion,” he wrote. “While bears will obviously capitalize on this news and narrative following Friday’s selloff in tech stocks, I strongly caution Buffett that he does not see this as a harbinger of bad news because he is a true believer in Apple.”
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Apple remains Berkshire’s largest holding, valued at about $84 billion. (Michael Nagle/Bloomberg/via Getty Images)
Berkshire Cash Position As of June 30, Berkshire’s net assets had risen to $276.9 billion from $189 billion three months earlier, mainly because Berkshire sold stock worth a net $75.5 billion. The company sold about 390 million Apple shares in the second quarter, up from 115 million shares sold between January and March, when the iPhone maker’s stock price rose 23%. Berkshire still held about 400 million shares as of June 30, valued at $84.2 billion.
At Berkshire’s annual meeting in May, Buffett explained that despite the company reducing its holdings of Apple, he still expects it to be its largest stock by the end of the year.
“We’ve been selling stock and I think it’s very likely that Apple will be our largest common stock holding by the end of the year,” Buffett said.
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Warren Buffett explained at Berkshire Hathaway’s annual meeting in May that despite Berkshire Hathaway reducing its holdings of Apple, he expects the stock to remain the company’s largest holding. (Christopher Goodney/Bloomberg/via Getty Images)
Buffett explained that he believes building the company’s cash position is a better option at this point than buying more shares, and he also discussed the tax implications of selling Apple shares. Capital Gains Tax Rates Historically, these interest rates have been low, and in the future, larger federal budget deficits could lead to higher interest rates.
“In the current environment, I have no qualms about building a cash position. Given the alternatives that are available in the stock market and what’s going on in the world, I find it very attractive to build a cash position,” Buffett said.
“Most people I know care more about not paying taxes than I do. At Berkshire we have no qualms about paying taxes, and we pay a federal tax rate of 21 percent on the gains we made from Apple stock. Until recently, that rate was 35 percent; when I ran it it was 52 percent,” he added.
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“It doesn’t bother me one bit to write a check. With everything America has done for you, it shouldn’t bother you that we write a check. Even if I write a check at 21 percent, I’m going to write you a higher percentage in the future, so I don’t think you’d mind if we sold a little bit of Apple stock this year,” Buffett said.
Reuters contributed to this report.
