Warren Buffett’s stock cut in Apple creates a $97 billion cash spike – analysts speculate it could be the reason behind Berkshire Hathaway’s huge cash pile
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Warren Buffettthe legendary investor, has taken an important step by investing his stake in Apple Inc. (NASDAQ:AAPL) and other stocks, generating a whopping $97 billion in profits for his company, Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK).
What happened: Buffett announced last week that he continued to reduce his position in Apple and other stocks in the third quarter, leading to a $97 billion profit for Berkshire Hathaway. The move has taken Berkshire’s cash levels to a record high of $325 billion, accounting for 28% of its asset value.
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Buffett’s decision has investors and analysts speculating about the reasons behind the sale. Some investors and analysts suggest that Buffett is a follower of the famous value investor Benjamin Grahamsticks to its principles, citing Apple’s relatively high price-to-earnings ratio compared to its potential earnings growth.
Others speculate that Buffett, who has often praised Apple, may be preparing for his successor or anticipating a possible crisis, hence the need to amass cash. “It’s so strange to see… [and it] begs the question: ‘Why is so much money being built up?’, thought Morningstar analyst Greggory Warren, the Financial Times reported.
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Warren also pointed out that he didn’t think Buffett was gearing up for a major acquisition, given his recent struggles to compete with other buyers. Moreover, Berkshire has not provided capital to major US companies like Intel, which were seeking tens of billions of dollars in capital to finance their operations.
Buffett has also scaled back his purchases of other stocks this year, acquiring shares worth just $5.8 billion through the end of September, a figure dwarfed by Berkshire’s $133.2 billion in stock sales.
Jeff Muscatello, a research analyst at Berkshire investor Douglass Winthrop, suggested the impending management transition could be a factor in Buffett’s decision to cash out. “The impending inevitable management transition makes it an opportune time to take stock for the next generation,” he said.
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Why it matters: The move comes after Berkshire Hathaway reported a decline in third-quarter operating profit, driven by weakness in the insurance underwriting segment. About 70% of the total fair value was concentrated in five companies as of September 2024.
An earlier report indicated that Buffett’s Berkshire Hathaway missed out on $23 billion in profits by significantly reducing its stake in Apple. The move confused investors, with some experts suggesting that Buffett prefers round numbers so stopping at 400 million shares may not be a problem. Others saw Buffett positioning Apple as an important long-term investment, similar to how he sees Coca-Cola.
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