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Warren Buffett's Berkshire Hathaway Unloads 3.7 Million Apple Shares

By Evan Niu, CFA - Feb 19, 2020 at 9:00AM

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That was just 1.5% of the holding company's total Apple position.

After trimming some of its Apple (AAPL -2.98%) position in Q3, Warren Buffett's Berkshire Hathaway (BRK.A -1.32%) (BRK.B -1.63%) unloaded nearly 3.7 million Apple shares in the fourth quarter. That seemingly sizable stake was worth somewhere between approximately $800 million and $1.1 billion, depending on when the shares were sold, according to recent regulatory filings.

That might sound like a lot of stock to mere mortals, but the sales represented just 1.5% of Berkshire Hathaway's total position.

Tim Cook standing in front of blown-up image of iPhone 11 Pro

CEO Tim Cook. Image source: Apple.

Freeing up cash

Following the sales, Berkshire Hathaway still holds 245.2 million Apple shares, representing a roughly 5.6% stake in the $1.4 trillion company. Other than minor fluctuations, the Oracle of Omaha's investment holding company hasn't meaningfully changed its position since early 2018.

Chart showing Berkshire Hathaway's Apple position

Data source: SEC filings. Chart by author.

Buffett has previously attributed some of the activity to one of his top lieutenants, Todd Combs or Ted Weschler, noting that sometimes the selling is simply done in order to free up cash for other investments as opposed to any deterioration in Apple's fundamentals. For example, Berkshire Hathaway had established new positions in RH and Occidental Petroleom in the third quarter.

This time around, Berkshire Hathaway bought a new 2.4% stake in grocery retailer Kroger for around $550 million while also initiating a position in biotech giant Biogen for nearly $200 million. The proceeds from the Apple stock sales cover that tab.

Apple was buying as Buffett was selling

About a year ago, Buffett expressed concerns that Apple shares were getting a bit expensive to purchase and said that Berkshire Hathaway wasn't "buying it here." Shares have gained roughly 85% over the past year as Apple's progress in growing its services segment has resonated with investors.

AAPL Chart

AAPL data by YCharts.

In fact, Apple has done such a good job taking control of the narrative that the stock is undergoing a "valuation rerating by the Street," according to Wedbush analyst Daniel Ives, which is how Ives sees Apple's market cap potentially reaching $2 trillion in the near future.

After years of trading at a discount to the S&P 500, Apple shares have been trading at a premium to the broader market in recent weeks. Apple and the S&P 500 are currently trading at comparable earnings multiples around 25.1 to 25.3. Apple shares cost 14 times earnings when Buffett said the stock was too expensive to buy.

However, there is one prominent Apple investor that doesn't seem fazed by the rising valuation: Apple itself. The Mac maker aggressively ramped up its share repurchase activity in the fourth quarter to $20 billion, which included a $10 billion accelerated share repurchase (ASR) program, even as the stock continued to set fresh all-time highs.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$137.44 (-2.98%) $-4.22
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$412,170.01 (-1.32%) $-5,529.99
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$273.86 (-1.63%) $-4.54

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