Finance
Selling Apple shares to invest in this ‘beautiful’ megacap – here’s why
Warren Buffettperhaps America’s most successful investor is at it again. His latest moves in the stock market have caught 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 started buying AAPL stock in 2016, and the tech giant became one of its largest holdings. Buffett previously had nice things to say about the tech giant, calling it a “better company” than other companies in Berkshire’s portfolio. Despite these positive comments, recent moves suggest that Buffett is changing his strategy at Apple.
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According to a report from CNBC, Berkshire Hathaway has drastically reduced its stake in Apple from 905 million in December 2023 to 400 million in June 2024, a drop of 55%. No one might have expected this, as Buffett was a great admirer of the tech giant.
Perhaps this carries the sell-off reasoning behind Apple’s recent performance. The company still posted sales of $85.8 billion in the June quarter – up 4.8% from the same period last year – but the outlook for the future was bleak.
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Sales in the Chinese market, a key market for Apple, plummeted 6%, and the company’s operating profit fared even worse, down 10%. It lost its previous position among the top five smartphone companies in China, while rival brands such as Huawei and Xiaomi performed very well. These problems, and a valuation that some analysts say appear overstated, may have prompted Buffett to reconsider his position.
Despite the trimming Berkshire’s stake in Apple Buffett remains optimistic about another investment: Berkshire Hathaway. He has repurchased $5 billion worth of Berkshire stock over the past three quarters, indicating a good outlook. “With our current mix of businesses, Berkshire should do slightly better than the average U.S. company,” he wrote in a recent shareholder letter.
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Berkshire Hathaway’s financial results have been excellent despite the ups and downs. In June, the company reported a 1.2% increase in revenue to $93.7 billion and a 16% increase in operating income to $11.6 billion.
The insurance group performed particularly well, with profits from insurance and fixed income investments increasing by 56%. However, Berkshire’s GAAP net income fell 16% to $30.3 billion, a figure Buffett calls investors should pay very little attention to due to the volatility of unrealized gains and losses on stock investments.
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Analysts have long predicted that Berkshire’s corporate profits will rise 10% in 2024 and then decline 3% in 2025. Buffett’s ongoing buyback programThis would have created 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 solution for investors looking for a safe and stable long-term investment. If Warren Buffett continues to express so much confidence in his own company, it could well be the green light for others to do the same.
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This article Warren Buffett Announces Shift: Selling Apple Stock to Invest in This ‘Beautiful’ Mega Cap – Here’s Why originally appeared on Benzinga.com
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