(Bloomberg) — For some, the collapse of Berkshire Hathaway Inc. by Apple Inc. can be interpreted as a lack of confidence in the growth story of the iPhone maker. But many on Wall Street are urging investors to stay calm and stay calm.
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The conglomerate led by Warren Buffett disclosed Saturday that it sold about half of its position in the tech giant during the second quarter. Its assets are now about $84 billion, down from $140 billion at the end of March. The sale came amid a strong stock market rally that sent Apple shares 23% higher and pushed the S&P 500 from another record high.
Since 2016, when Warren Buffett first disclosed his stake in Apple, its shares have increased nearly 900% as the company continues to assert its dominance in the industry, delivering billions of dollars in profits. of Berkshire on the way.
“Buffett’s reduction of his Apple stake is purely about risk management,” said Joe Gilbert, senior portfolio manager at Integrity Asset Management. “If there were any concerns about Apple’s long-term viability, Buffett would have gotten out of the position. Like any Berkshire stock short, Buffett has an unrealized advantage. .”
The Berkshire portfolio reveal comes just days after Apple released its quarterly results, which showed a return to revenue growth and indicated that new AI features will boost iPhone sales. in future places. Apple shares were steady after the earnings report and finally ended the week higher despite a broad selloff.
While Buffett’s investment strategy – long known as the Oracle of Omaha – is hard to ignore, Berkshire’s stake in Apple has been so large in recent years that some investors have begun to wonder will the firm have to reduce its equilibrium position. its objects. Even after the break, Apple remains one of Berkshire’s biggest holdings.
Cathy Seifert, a research analyst at CFRA, said: “If you have this high level, you take some profit and reduce the risk of concentration.” “They still have a very focused portfolio,” he added.
Read: Berkshire Cuts Apple Brand By Almost Half in Selling Spree (2)
It’s also not the first time Berkshire has cut its stake in Apple. At its annual meeting in May, the firm revealed that it had reduced its position in the first quarter of the year. At the time, Buffett warned investors that taxes may have played a role in the sale.
Representatives for Apple and Berkshire Hathaway did not respond to requests for comment outside regular business hours on Sunday.
The latest announcement comes amid wider concerns about the possibility of a recession ahead. Worse-than-expected jobs data on Friday raised fears that the Federal Reserve may be waiting too long to start cutting interest rates, sending the Nasdaq 100 Index into a technical correction and the Cboe Volatility Index to to 25.
Megacap peers including Microsoft Corp., Amazon.com Inc. and Alphabet Inc. all down from records reached in early July. In total, Nasdaq 100 members have lost more than $3 trillion in value, surpassing that of both Nvidia Corp. and Tesla Inc. each saw a drop of more than 20%. Meanwhile, Apple is down 6% from its all-time high.
It’s likely that Berkshire, like a growing number of investors, wants to see more evidence that Apple’s AI investment will pay off in revenue growth and isn’t convinced it’s happening quickly, according to Brian Mulberry , client portfolio manager at Zacks Investment Management.
Apple’s stock – 33 times forward earnings as of mid-July – was 11 points higher than the broader S&P 500, the gap last seen after the pandemic and the crisis. of finance, data compiled by Bloomberg show. But despite the premium, Mulberry thinks it still makes sense for investors to own Apple shares. “They are still in good health and will continue to grow earnings faster than the broader market,” he said.
Others, including Wedbush analyst Dan Ives, point to the credibility of Apple’s brand and future growth — it’s on the cusp of what he thinks is a major turnaround that will drive revenue growth in 2025 and 2026.
“While some may read this as worrying, Apple just delivered a strong quarter with a big AI cycle ahead and we don’t see this as time to hit the exit button ,” Ives said.
Of course, Apple isn’t the only stock that Berkshire has trimmed recently — it’s also offloading shares of Bank of America Corp., reducing its position by 8.8% since mid-July. Some see that as a sign that Buffett doesn’t see personal and company problems, but is betting that US consumers and the broader economy will weaken.
“Buffett may feel that we are on the verge of collapse, so by accumulating money now he will be able to buy companies at a lower price later,” said Jim Awad, senior manager of Clearstead Advisors. . “He may sense an opportunity coming.”
–With help from Ryan Vlastelica, Subrat Patnaik and Natalia Kniazhevich.
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