He played it down a little at the AGM in May when questioned about his Q1 sale of 115m Apple shares
But meanwhile his trader was working flat out to sell half his remaining stake
Bloomberg data tells me 4.4bn Apple shares traded in Q2 so Berkshire’s sale of 394m means he was 9% of the volume – that’s big!
And since another 1.6bn Apple shares have traded so far THIS quarter
and the average price is 19% higher ($222 vs $186)
I wouldn’t be surprised if they’ve sold another 141m shares…
But Warren Buffett said at the AGM that he expected Apple to remain Berkshire’s largest stock investment!
Yes, but he did caveat that with “unless something extraordinary happens”
And this AI frenzy feels “extraordinary”
He also said selling made sense because the 21% Federal Tax rate on the gains would probably increase
meaning he’d rather lock in his gains at a known 21% than risk having all historic gains taxed at a potentially higher CGT rate – all those living in the UK may want to take note …
But his reasoning may be more than just taxes…
Because Berkshire is also sitting on massive unrealised gains of ~$57bn on their Amex and Coca Cola stakes
And he hasn’t sold those…
Maybe it’s because AXP and KO are still growing revenue and trade on lower multiples
What do you mean?
Look Warren Buffett is a Value investor
Meaning he’s sensitive to price
And Apple is priced at 30x historic earnings
The problem is revenue hasn’t grown over the past year and
EBITDA margins of 34% are the highest in 9 years
Now it’s one thing having a high PE on low earnings that can grow
But Apple has a HIGH PE on HIGH earnings (that will fall if Google stops paying $20bn to be the default search engine)
People forget that many Value investors (like us) also want growing companies,
We just don’t want to pay any price for that growth so there is a price at which we sell
It seems Apple has reached that price at which Mr B is a seller
But I thought his “favourite holding period is forever”?
Yes, but he said, “favourite”
He didn’t say “our ONLY holding period is forever”
And he also said, “be greedy when others are fearful and fearful when others are greedy”
And in the past few weeks ago, we’ve learned that:
– Inflows into US Large cap funds of $280bn this year are on track for the 2nd largest on record,
– US Equity Index futures traders had never been longer at $300bn, and
– We have a $9bn 3x leveraged semiconductor product that attracted $2.8bn of new money in July …
and is down 60% in four weeks!
All of which strike me as signs of investors being “greedy”
So it’s entirely right for him to be “fearful”
He’s simply doing what he told us to do many moons ago
(to anyone who’s listening)
Well done Mr Buffett – 10/10
You’re THE Value Investing GrandMaster 👏
Everyone else, “Please try harder” 😉
I’m scoring the Oracle of Omaha (and his trader) 10/10 for the timing and execution of their Apple sale
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