Berkshire Cuts Apple Investment by About 13%, Buffett Hints That It's for Tax Reasons

Warren Buffett's Berkshire Hathaway scaled back its substantial investment in Apple during the first quarter, as the renowned "Oracle of Omaha" continued to trim his once-favorite position.

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According to its first-quarter earnings report unveiled on Saturday, Berkshire Hathaway disclosed that its Apple investment was valued at $135.4 billion, indicating ownership of approximately 790 million shares. This reflects a decrease of roughly 13% in the stake. Nonetheless, Apple remained Berkshire's most significant holding by a considerable margin at the close of the quarter.

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This marks the second consecutive quarter in which the conglomerate based in Omaha has reduced its stake in the iPhone maker. In the fourth quarter, it divested approximately 10 million Apple shares, representing just 1% of its extensive stake. Considering the fluctuation in Apple's stock price, this latest filing suggests that Berkshire sold around 116 million shares.

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Buffett, addressing shareholder inquiries at Berkshire's annual meeting in Omaha, indicated that the sale was motivated by tax considerations following substantial gains. He also hinted that the decision might be linked to his desire to preempt a potential higher tax obligation in the future, should rates increase to address the burgeoning U.S. fiscal deficit.

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"I'm perfectly fine with writing that check, and I would hope, given everything America has done for all of you, it shouldn't bother you that we do it. And if I'm doing it at 21% this year and a little higher percentage later on, I don't think you'll actually mind the fact that we sold a bit of Apple this year," Buffett remarked during the meeting.

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Buffett's admiration for Apple blossomed after one of his investment managers, Ted Weschler or Todd Combs, persuaded him to invest in the company years ago. He even lauded the tech behemoth as his second-most crucial business entity after Berkshire's cluster of insurers.

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Speculation abounded that the 93-year-old investment luminary reduced his favored stake due to concerns over valuation. Apple's stock soared by an impressive 48% in 2023, as mega-cap tech shares spearheaded the market surge. At its pinnacle, Apple dominated Berkshire's equity portfolio, constituting 50% of it. Presently, the shares are trading at over 27 times forward earnings.

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Nevertheless, Buffett reiterated his admiration for Apple during the meeting, expressing confidence that it was "extremely likely" for Apple to retain its status as Berkshire's largest holding at the conclusion of 2024.

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The iPhone maker witnessed a significant upswing in its stock price over the past week following the announcement that its board had sanctioned $110 billion in share repurchases, the largest in the company's history. However, Apple experienced a decline in overall sales and iPhone sales. The shares have dipped by more than 4% thus far this year amidst concerns regarding its growth prospects.

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Despite the reduction in its stake, Berkshire remains Apple's foremost shareholder outside of exchange-traded fund providers.

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