Apple (AAPL 0.45%) has long held the esteemed honor of being the largest holding in Berkshire Hathaway's (BRK.A +1.14%)(BRK.B +1.20%) huge $312 billion equities portfolio, which, for the past six decades, has been run by none other than Warren Buffett, arguably one of the greatest investors of all time. At one point, Apple made up 40% of Berkshire's portfolio.
The company began losing enthusiasm for the stock in 2023 and since then has sold roughly two-thirds of that position. Despite that, the stock still made up over 24% of Berkshire's portfolio at the end of the second quarter. Did Buffett and Berkshire sell more shares of Apple in the third quarter?
There are some clues
Berkshire recently reported its third-quarter earnings, but the company likely won't report its third-quarter 13F filing, detailing changes in the equities portfolio, until Nov. 14. Funds of a certain size must file 13F forms no later than 45 days after each quarter ends. However, there were some clues in the third-quarter report that the company may have continued to trim its position in Apple.
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For one, Berkshire said in its earnings release that it had after-tax realized gains on sales of investments of $8.2 billion during the quarter. As Barron's pointed out, that kind of gain on only about $12 billion of equity sales in the quarter would be consistent with a sale of Apple. Berkshire's cost basis on its consumer stocks also fell in the quarter from about $13.4 billion in the second quarter to about $12.2 billion in the third quarter.
It would not be surprising to see Berkshire continue to pare its position in Apple over time. When it dumped all of its airline holdings in 2020, Buffett said, "When we sell something, very often it's going to be our entire stake: We don't trim positions."
Now, Apple could be different given the position's size, but the size could also explain why it will take Berkshire so long to exit the position. Buffett has previously said that his company's size, and the size of its positions, make it difficult to go in and out of stocks quickly.
Apple has been a great investment for Berkshire. Buffett said he initially got interested in the business in 2016 when he saw how attached one of his friends was to the iPhone, the company's flagship product. Berkshire continued to buy the stock for several years after that, but just looking back at the stock's performance since 2016, Apple has been a very good investment.
It's always difficult to pinpoint why Buffett sours on a position. But Apple and other large tech stocks have become expensive in recent years. The iPhone maker is also still dealing with the fallout from tariffs, and many investors are concerned that management doesn't have a strong enough strategy to capitalize on the artificial intelligence boom.
It's consistent with other Berkshire actions
It also would not be surprising to see Berkshire continue to trim its stake in Apple because Buffett and his team are clearly concerned about elevated valuations in the market.
The company has purchased very few stocks this year, hasn't repurchased a single share of its own stock, and continues to accumulate record amounts of cash and short-term U.S. Treasury bills. Berkshire's stock has generated outstanding returns over many decades because management has been able to avoid the brunt of economic downturns and invest with a long-term view over an economic cycle. If Buffett and his team view tech valuations as inflated, they won't hesitate to sell.
