It was the share sale that went viral around the world.
In the second quarter of 2024, Warren Buffett sold approximately $90 billion worth of Berkshire Hathaway‘S Apple (NASDAQ: AAPL) shares. This follows Berkshire also selling blocks of its Apple shares in the fourth quarter of 2023 and the first quarter of 2024.
What was Buffett thinking? And would selling so much Apple stock be the biggest investment mistake he ever made?
Potential good reasons to sell Apple
First, let’s look at why Buffett sold 390 million shares of Apple stock in Q2. Some might think that the legendary investor is fed up with the company. I don’t believe that’s the case.
Certainly, Buffett wrote in his 1988 letter to Berkshire shareholders: “[W]When we own stocks in great companies with great managers, our favorite holding period is forever.” The fact that he sold nearly half of Berkshire’s stake in Apple in the second quarter could indicate that he no longer views the company and its management team as great.
But Buffett said at Berkshire’s annual shareholders meeting in May that American Express And Coca Cola were “great things”[es].” He added: “And we own Apple, which is an even better business.” Buffett said this with Apple CEO Tim Cook in the audience. The statement does not sound like the words of a man who does not like Apple’s business or its management.
Perhaps Buffett sold Apple because of valuation concerns. Perhaps he wanted to increase Berkshire’s cash hoard (which now stands at nearly $100 million). $277 billion) to buy a company that he believes offers an even better opportunity.
Or perhaps Buffett expects taxes to rise significantly in the future and that Berkshire can retain more profit by selling now. He hinted at this reasoning at Berkshire’s shareholder meeting.
Buffett’s biggest investment mistake?
Whatever Buffett’s reasons for selling Apple, could it be his biggest investment mistake ever? My answer to that question is: I don’t know. I think that’s the best answer.
Different investors may make different decisions about whether to buy, hold or sell a particular stock. And their different decisions may be the right ones for them.
Before Berkshire reported its Q2 results, Apple made up 43% of the conglomerate’s total portfolio. As much as I like Apple (it’s the largest stock holding in my portfolio), I wouldn’t be comfortable with it making up such a high percentage of my assets. But Buffett had no problem investing that much money in Apple for years.
We don’t know what Buffett plans to do with the money he raised from selling Berkshire’s Apple stock. As I said earlier, he may have a better investment opportunity in mind. It’s never a mistake to sell a stock if you can put your money to better use.
A better question
While I’ve focused so far on whether selling $90 billion worth of Apple stock could be Buffett’s biggest investment mistake, I think there’s a better question to ask. That question is: Does Apple remain a good stock for investors to own?
This is a big question for many investors, including Buffett. Apple remains Buffett’s largest holding by far.
In my opinion, the answer to this question is a resounding yes. My confidence comes largely from Apple’s new capabilities in artificial intelligence (AI).
Wedbush wrote to investors last week: “We believe it is the wrong move for investors to bet against Cook and Cupertino on an AI-driven supercycle led by the iPhone 16 and Apple Intelligence as the growth renaissance returns to the Apple story.” I agree 100%.
Maybe Buffett made a mistake by selling so much Apple stock; maybe not. But I think anyone who underestimates Apple now is making a mistake that could cost them a lot of money in the years to come.
Should You Invest $1,000 in Apple Now?
Before you buy Apple stock, here’s what to consider:
The Motley Fool Stock Advisor team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $615,516!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns as of August 6, 2024
American Express is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Warren Buffett Just Sold $90 Billion Worth of Apple Stock. Could This Be the Biggest Investing Mistake He’s Ever Made? was originally published by The Motley Fool
