Berkshire cuts Apple stake by almost half in selling spree

Berkshire Hathaway Inc. slashed its stake in Apple Inc. by almost 50 per cent as part of a massive second-quarter selling spree that sent billionaire Warren Buffett’s cash pile to a record $276.9 billion.

In all, Berkshire sold $75.5 billion worth of stock on a net basis in the period, the Omaha, Nebraska-based conglomerate reported Saturday. Operating earnings rose to $11.6 billion, up from $10 billion for the same period a year ago.

Buffett was unloading shares as the S&P 500 stock index rallied, setting a record high in mid-July, though the index has declined in each of the past three weeks on concern that artificial intelligence euphoria had gotten overdone. On Friday, weak labor data underscored the risk of an economic downturn, and the S&P dipped 1.8 per cent.

“You could conclude this is another sell signal,” said Jim Shanahan, an analyst at Edward Jones who covers Berkshire. “This was a far higher level of selling activity than we were expecting.”

Buffett’s Berkshire has also been significantly paring its Bank of America Corp. stake, its biggest bank bet. Berkshire has trimmed that position by 8.8 per cent since mid-July, according to a filing late Thursday.

Berkshire has struggled to find ways to deploy its mountain of cash as share prices soared and deal activity stagnated. At the firm’s annual shareholder meeting in May, Buffett said he wasn’t in a rush to spend it “unless we think we’re doing something that has very little risk and can make us a lot of money.”

Berkshire has more recently used stock buybacks as one way to deploy the cash, but even that’s become tougher in recent months with its stock hitting records. Berkshire repurchased about $345 million of its own shares during the quarter, the least since the company changed its buyback policy in 2018.

Since Berkshire first disclosed its Apple stake in 2016, Buffett has ridden the gains to accumulate a massive paper profit. Berkshire had spent just $31.1 billion for the 908 million of Apple shares it held through the end of 2021. Now his roughly 400 million shares of Apple were valued at $84.2 billion at the end of June.

Buffett said at the May shareholder meeting that Apple was an “even better” business than two others it owns shares in, American Express Co. and Coca-Cola Co. He said at the time that Apple would likely remain its top holding, indicating that tax issues had motivated the sale, “but I don’t mind at all, under current conditions, building the cash position,” he said.

Bloomberg Intelligence analysts Matthew Palazola and Eric Bedell said in a note Saturday that Berkshire’s stock sales “are likely aimed at avoiding higher capital gains taxes, and profit harvesting may continue in some long-term positions.”

Cupertino, California-based Apple reported this week that sales to China fell 6.5 per cent to $14.7 billion in the third quarter, missing the $15.3 billion projection from Wall Street.

The results rekindled fears that Apple is losing ground in one of its most important overseas markets. Apple is up against fiercer competition in the region, and the government has reined in the use of foreign technology in some workplaces. Chinese economic growth also has worsened.

Apple attributed much of the decline to the effects of a strong dollar, saying that the underlying business in China is actually healthier than before. Three months ago, executives said the slowdown was less about an underperforming iPhone and more about weak sales of other products.

Apple’s shares have gained this year, lifted by investors’ hope that new AI technology would help boost sales. But on July 28, Bloomberg News reported that Apple’s upcoming AI features will arrive later than anticipated, missing the initial launch of its upcoming iPhone and iPad software overhauls but giving the company more time to fix bugs.

Edward Jones’s Shanahan said the scale of Buffett’s Apple selling in the second quarter indicates that the legendary investor may not be done yet.

“I would have thought it would be really far-fetched for him to sell his remaining stake in Apple, but that doesn’t seem really far-fetched anymore,” Shanahan said. “I don’t think zero’s out of the question now.”