Warren Buffett Is Selling Apple Stock

Warren Buffett the greatest investor of all time just sold half of Berkshire Hathway's Apple stock this massive reduction was revealed at the release of their second quarter earnings the value of Burger's current Apple holding was marked at 84.2 billion last quarter they owned 5.1% of Apple which would be valued at $73.59 billion at today's price representing 44.3% of berkshire's public stock portfolio since buying Apple in 2016 Buffett has trimmed the position a couple of times times however none have even been close to this recent reduction so what happened why is he selling Apple to help figure that out I'm going to reference the 2024 Berkshire hathway annual meeting when he was asked about trimming his Apple stock position in q1 I'll share the exact reasons he said then on top of that I'll cross reference it with prior comments he made about selling Apple finally I'll share what Warren Buffett is investing the money in instead of apple and the answer may surprise some of you and to wrap it up I'll give my analysis on Apple stock to see whether it's something that we should be holding over the long term let's roll intro [Music] [Applause] [Music] [Applause] [Music] my name is Zach this is dividend data and you should leave a like And subscribe to the channel if you enjoy the video those of us who have followed Warren Buffett for a long time assumed that Apple would be one of his long-term Buy and Hold stocks similar to his investment in Coca-Cola and American Express he got in at a fantastic price during 2016 and the company's economic moat has only widened during that time the iPhone is the most dominant product in the world and while growth is slowing in that category Apple's product ecosystem and user base is stronger than ever this helps build an economic moat around the company something that Warren Buffett loves to invest in in the 2021 Burkshire hathway annual letter Buffett referred to Apple as one of our four giants in fact that year it was the runnerup Giant and he would often comment about how the share repurchases were increasing their ownership stake in the company with no additional Capital needed however in the following years growth slowed at the company despite all these share BuyBacks Revenue per share was flat from 2022 to 2023 and it seems like we'll be flat again in 2024 and for cash flow per share for fiscal 2024 is not likely to pass 2022 is free cash flow per share so growth is slowing and debt is rising as they use it to fuel their large share rep purchase program in Warren Buffett's 2022 and 2023 sholder letters Apple was only mentioned twice in each document in that time Warren Buffett made very small trims to Burkshire Hathway's Apple position however he came back around to actually call these a mistake which he mentioned in their 2023 annual meeting but we don't have anything like that but we own 100% of but we're very very very happy to have 5.6 or whatever it may be percent and we're delighted every tenth of a percent that goes up it's like adding $100 million to our earnings I mean our share of the earnings and they use the earnings to buy out our partners which we're glad to see them sell out too the index funds have to sell out they bring the number of shares down and uh you know I but we went up slightly last last year and I made a mistake a couple years ago and I sold some shares when gains were useful to take that year from a tax standpoint but having heard having heard me say that it was a dumb decision so in 2023 he said it was a dumb decision to sell Apple stock with his main reason being that it was a good time to do it from a tax perspective likely offsetting it with some losses that year and if my memory is correct then I also remember Charlie Munger his longtime business partner saying that trimming Apple was a mistake however in the first quarter of 2021 Buffett reduced their apple position by 133% he was asked about it in the 2024 Berkshire hathway annual meeting and this was what he had to say about it we have soul shares and uh I would say that at the end of the year I would think it extremely likely that that uh that uh Apple is the largest common stock holding we have plus something dramatically happens that really changes Capital allocation we will uh we will have apple as our largest investment uh but I don't mind it all under current conditions building uh the uh cash position I think uh when I look at the alternative of what's available in the equity markets and I look at the composition of what's going on in the world uh uh we find it quite attractive so even after this recent larger sell Apple is still the number one stock in their portfolio so he wasn't incorrect in that prediction so far and he teased a detail there of what he's doing with the cash which I'll break down later but all I'll say is that Warren Buffett is loving the higher interest rates right now and has a lot of his money in treasury bills again more on that later but let's get to the rest of his explanation for why he sold Apple stock almost everybody I know pays a lot more attention to not paying taxes uh uh then I think they should we are paying a 21% federal rate on the gains we're taking in in uh apple and that rate was 35% not that long ago and it's been 52% in the in the past uh when I've been operating and uh it uh the government owns the federal government owns a part of the earnings of the business we make they don't own the assets but they own a percentage of the earnings and uh uh they can change that percentage any year and the percentage that they've decreed currently is 21% and I would say with the present fiscal policies uh I think that something has to give and I think that that higher taxes are are quite likely and if I'm doing it at 21% this year and we're doing it at a li higher percentage later on I don't think you'll actually mind the the fact that uh we sold a little apple this year so based on this response it seems like the main reason in his mind for selling Apple stock was that he could lock in his very large gains on the position since he bought in 2016 at a very low cost basis so it's interesting that Warren Buffett seems to have come to the conclusion that higher taxes on capital gains are inevitable at this point and therefore he's trying to lock in some of those apple gains prior to any kind of change happening well all we know is that in the latest quarter he sold a crap ton of Apple stock and this was as the stock returned to all-time high prices while I might add that the underlying financials have not improved in that time however this reason of taxes contradicts almost entirely with what Warren Buffett said in 2023 about making decisions based on tax as being a mistake and I have to wonder if his now deceased uh business partner Charlie Munger is thinking it's a mistake from the grave right now but that said we have to keep in mind that Warren Buffett is the best investor of all time and he is doing something very smart with his money where you basically can't lose after I explain what that is I'll do a quick updated analysis on Apple stock and share my thoughts on whether it's a buy sell or hold Warren Buffett has just dramatically expanded his cash cushion he now has over 2346 billion invested into treasury bills and he is getting over 5% on his money doing nothing straight from the government since interest rates went up in 2022 he has been putting so much money into these T bills and is now just about to balloon even further that gives Burkshire hathway a massive war chest to go and find Investments if there is any kind of stock market crash Warren Buffett is ready to go shopping and in the meantime if it doesn't happen he can continue to just get 5% on this wall interest rates remain high and if you think about it as someone who's managing a portfolio as large as him with $234 billion of cash sitting around there are not many places you can invest that money to get 5% that reliably at no risk of downside and this option is not limited to large corporations like Berkshire hathway you can create an account on treasurydirect.gov and buy T bills yourself and financially speaking you can make the argument that that will turn out being a much better investment over the next few years than holding app Apple stock at current prices Apple's valued at $ 3.37 trillion their earnings are basically flat over the past 3 years and they're lacking a lot of organic growth and all of their cash is just going to share BuyBacks for the most part that said Apple does have an incredibly strong brand and as I mentioned earlier their product ecosystem gives them an extremely wide economic mod apple is not going to go anywhere they will remain a top player in Computing for the foreseeable future the iPhone is the most important product in every person's life that has it this gives them massive leverage into launching additional services on top of it including products in their ecosystem that works so well like airpods for an example and services is now the second largest revenue segment at Apple at around $ 85.2 billion for 2023 and it is also their fastest growing product segment which will likely continue well into the future this includes things like fees from the Apple App Store and then subscription services like apple music Apple TV Apple news Apple gaming and all those various services and that part of the pie is going to keep growing however iPhone still is their top Revenue Source at 52.3% and this business has not been growing in recent years hence the flat earnings most of the world already has smartphones and people are upgrading less often however a lot of people in the tech industry are predicting that Trend might change this year that is because the new Apple iPhone will be integrated with apple intelligence which is their new AI product that will be integrated into the operating system system of the new iPhone and I tend to agree that this will cause the biggest iPhone upgrade cycle seen in recent years in fact I'm going to be one of them I will likely upgrade for that new iPhone and if we look back a year from now and that was a smashing success and they have record iPhone sales that quarter then selling right now might end up being a mistake Apple's the number one stock in the S&P 500 so there's always constant money piling in as the passive investors feed and buy into Apple stock on top of that they spend 80 to100 billion a year buying back their own stock so this is there's just constant pressure in making the stock more valuable right now analysts have a consensus price target for Apple stock of $22.3 that is $7.50 below the current stock price making it overvalued slightly and right now it has a consensus buy rating among analysts at 74.4% saying buy and 20.5% saying hold and I personally would not bet against Apple at this time however relative to the other big tech companies they're projected to have far less earnings growth over the next few years they're project in 2027 to have negative growth in 2028 to only have 2% growth and personally someone who's analyzing all of these companies I would rather buy Google right now at current prices I would rather buy Microsoft at current prices I would rather buy Amazon at current prices Apple will continue to be a free cash flow machine with a wide economic mode but they do need to find that next big growth business in my Investment Portfolio I own 50 shares of Apple stock at a cost per share of $121.6 which gives me an 8.71% Total return and personally I'll be holding this position and I don't have it on the chopping block right now and although I admire Warren Buffett and respect all his investing decisions you don't always have to follow blindly what they're doing it's important to understand it but you don't follow all the time if you found this video to be valuable please leave a like And subscribe to the Channel Sign up for dividend dat.com 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