Decoding Warren Buffett's stake reductions in Apple, BofA

[Music] welcome back to morning brief brought to you by Invesco the summer months are typically slow for investors but billionaire Warren Buffett he kept busy Buffett who celebrated his 94th birthday over the weekend steadily trimmed Berkshire Hathway's Holdings in Bank of America by more than 14% during July and August Buffett also unloaded roughly half of his shares of longtime favorite Apple during the summer months joining us now is Lee mson president and CIO at portfolio wealth advisers Lee great to have you here thanks for taking the time with us on the day all right so first and foremost what do you think is the strategy Behind these moves that Buffett made during the month and recent weeks well you gotta remember he's been in Bank of America since about 2011 uh he's done very well in the stock he's just simply reducing a position he also reduced some Capital One which tells us one thing uh he doesn't you know obviously uh big banking isn't what it used to be and we have to look at what he thinks the long-term prospects are also with with with apple Warren Buffett has made an amazing amount of money on Apple uh he's still gonna it's still going to be his largest position he's going to have about a hundred billion of it uh you know that he has after these sales I think investors shouldn't read too much into it let me explain this when you're up 150 200 250 3 400% it's okay to take a profit if you read all of the birkshire Hathaway annual reports for you know last you 20 30 years he talks about that every once in a while when you double or triple your money you can take money off the table here's sort of the read between the lines I think everybody's trying to surmise are there better prospects other places and I think when you see these tiny little positions like hio and these tiny little positions like Ulta beauty you start to think are there is there Great Value in the market outside these big names and so if you have big Winners you know you want to eventually take some of that money off the table and push into other areas I think that that's really the message here and also he's sticking with that oil trade you know I did not you know I I understand the story about ocidental I understand Chevron um but he's you know those have not done great over the past few years and he's still with it it's interesting that on the one hand Lee you say don't read too much into it but on the other hand if you take a look at exactly what you just described getting a little bit off the top for a company like apple that's exactly what analysts have really started to Rally around over the past couple of weeks amid this kind of great rotation we're seeing a bit up in some of the smaller cap equal weighted S&P 500s as opposed to those big Tech names did Buffett know something that the rest of us didn't as always here well I mean I think it was pretty obvious when you have very little breath in the market and everything's based on this big Tech AI trade I mean certainly there's going to be rotation but I think here you have to think if you just generally observe the market outside the mag 7 there are tons of small and mids size company and I'm just talking about companies that are under a hundred billion dollar I mean you know you take a company that's 50 billion you know market cap and that's considered small today they've been languishing for some time so I don't think it's a really you know a too deep of observation now the timing certainly I get your point that how did he know that this rotation was going to occur in the summer and you know what sometimes people like Buffett they just have that magic that magic ability to see things but he also has a larger crew there's a lot of people uh not just Buffett that were rotating back into gra value I think when you look at the valuations this summer you know it just becomes obvious that eventually small Cap's going to have to rotate but also remember those little positions like in higho like at Ulta those are tiny sub billion dollar positions he's just starting to pick away what is happening a lot of cash is being raised but there's not a speed at getting into those sector rotation uh trades into value I think that that's an even more important uh point to make all that dry powder hasn't been spent just yet you know it's it's really interesting as we're thinking about so many of those dip buying opportunities that may prevail if September holds true and we do see type some type of weakness where would those dip buying opportunities push Berkshire hathway where where do they push you where are those opportunities you're looking at and perhaps keeping some dry powder ready Lee well I think you've got to look down the market cap a little bit I obviously there's some issues with the election right uh we don't know about how that regulation is going to go that's going to affect Banks and energy so I'm a little less interested in that area going forward but I think when I when I look at where some of the great plays can be I like to look at beat up retailers you know I my own little list of of things that have gotten very cheap you start looking at some of this low valuations where you're dealing with trades dealing with people who are in the lower income still you know you think of like a Dollar Tree you think of a Dollar General uh you think of some of these beat up reers retailers like Ulta me I don't think Ulta is really the company we wanted to go but anything that's going to get consumers spending on the you know starting next year I think that that's where a lot of action can see because eventually people have to move away from the hyperscalers and AI story and think about where that money is going to flow into and if the econom econom is going to soft land and spending is going to continue on you know what names have been crushed over the last couple years I think that's where you go so I think a lot of things that have to do with the retail spending trade it's interesting though because as we've gotten uh closer to the end of this earning cycle you're really seeing a lot of contradiction in these retail names you've got Walmart on the one hand and then you've got even olto struggling on the heels of their earnings alongside the likes of Lululemon where is Buffett finding the clear thesis on which companies are going to be able to continue to benefit from consumer spending as we are St starting to see some cracks across the retail sector well I'm not sure he is I mean I'm not here to like argue with the you know one of the richest men in the world who you know been on the earth twice as long as me but let let me tell you uh when you take a company uh you know like Ulta I think Walmart's eating their lunch I think you know if Ulta doesn't have anything special Sephora has something special you know if you ask my daughter you ask my wife about Ulta they'll say please for that type of price point they'll just pick up those things over at Target so I'm not you know completely I don't really see a lot in his 13f that suggests he's on that trade again I think he's still looking at Classic Buffet stuff what's cheap what's trading for cheap earnings what there's a catalyst I think more that I see in that 13f is that he's still believes that AO defense and Military spending's going to continue and I see more in what Buffett is looking at um especially insurance that that position in chub that he just keeps pushing just he can't not make money off a chub but again his business it's insurance I think it what he knows best I don't think we've yet to see those real plays in birkshire halfway outside of Ulta I think it's something that you know you want to keep looking and just because the first strike in that area of consumer spending being Ulta um I'm more interested in what he's going to buy over the next six months I don't think right now I've seen it yet in the tea leaves uh when you Holdings all right we'll see what those Acquisitions or what those purchases in the next 6 months do for this company that's just struck and held above this $1 trillion market cap here Lee mson of portfolio Wealth Advisors thanks so much appreciate it