Finance
Why Warren Buffett’s Billions at Berkshire Hathaway Are a Bearish Stock Market Signal
Get the bears in line.
Berkshire Hathaway’s (BRK-A, BRK-B) cash pile hit another record high of $189 billion in the first quarter, the industrial giant said in its earnings release on Saturday.
That massive war chest will likely reach $200 billion by the end of the current quarter, Buffett told shareholders today at a packed CHI Health Center.
Such a wealth of dollars indicates that Buffett is currently “bearish” on the stock market, according to one veteran value investor.
“Buffett is bearish on the stock market. He shows this by growing his massive cash position to $200 billion, selling Apple stock (AAPL) and saying he sees no bargains,” Smead Capital Management CIO and long-time Buffett watcher Bill Smead told me on the basis of the Woodstock fair. of capitalism.
Berkshire’s decision to reduce its stake in Apple and increase the company’s cash position is a move that Buffett believes makes sense given the current macroeconomic environment.
“I don’t think anyone at this table has any idea how to use it effectively, and that’s why we’re not using it,” Buffett said in response to a question from shareholders about why Berkshire isn’t putting its cash reserve to work. .
“As the world becomes more sophisticated, complicated and interconnected, more can go wrong” and you want to be able to “act when it does,” Buffett added.
Apple and those other Buffett stocks
The bears have some meat to feast on, compliments of Buffett.
Berkshire cut its stake in Apple by about 13% in the first three months of the year, marking the second quarter in a row that the conglomerate has cut its stake in the iPhone maker.
As of March 31, Apple accounted for about 40% of Berkshire’s massive stock portfolio, worth a total of $135.4 billion.
Berkshire has reduced its position in Apple as the tech giant has struggled in recent quarters and the stock’s valuation remains high. The stock fell about 10% through the first three months of the year, which weighed on Berkshire’s quarterly results.
While some initially saw Buffett’s decision to cut stakes in Apple as a sign that his stance on the tech behemoth has changed, one analyst told Yahoo Finance that “getting off the top a little won’t hurt.”
“This doesn’t worry us too much because Apple had such a large position in the 13-F portfolio at the end of 2023, so anything to reduce that exposure is good from a diversification perspective,” Morningstar analyst Greggory Warren told me at the exchange . meeting.
The legendary investor was also quick to reassure shareholders about his confidence in Apple.
“By the end of the year, I think it’s extremely likely that Apple will be the largest common stock holding we have today,” Buffett told a packed room that included Apple CEO Tim Cook.
Buffett compared Apple to two of Berkshire’s best-known top companies: Coca-Cola (KO) and American Express (AXP). While he called Coca-Cola and American Express “wonderful companies,” he noted that Apple was an “even better company.”
While Buffett remains bullish on Apple, the company faces near-term headwinds.
Weakness in China is a focus for Apple investors as the country loses market share to domestic players. A more cautious American consumer has not helped investor sentiment either.
“It’s easy to blame the overall consumer environment, but there is also market share dynamics as Huawei and others become extremely competitive,” Christine Phillpotts, senior vice president of emerging markets equities at Ariel Investments, told the Berkshire annual meeting.
It’s a trend that Phillpotts says is likely to accelerate as domestic players “continue to increase the value proposition.”
Shares of Apple are down 4.8% since the start of the year despite upcoming AI announcements, far underperforming the S&P 500’s 8% gain.
Buffett’s cash hoard suggests other stocks could follow Apple’s lead lower as the year progresses.
Curious about what Apple faces in the AI competition? Yahoo Finance Editor-in-Chief Brian Sozzi discusses AWS CEO Adam Selipsky’s AI plans in a new episode of Amazon’s AI plans. Starting bid podcast below.
Seana Smith is an anchor at Yahoo Finance. Follow Smit on Twitter @SeanaNSsmith. Tips about deals, mergers, activist situations or something else? Email seanasmith@yahooinc.com.
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