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Why Warren Buffett Just Sold Half His Stake in Apple Stock

Apple iPhone 15 Pro Max smartphone new models, demo display launch at Apple store

Key Points

  • Warren Buffett's most recent holdings are reported in the latest quarterly report, and investors can gain essential insights from it. 
  • Most investors and Wall Street analysts seem to favor amplifying a rotation out of technology and into energy.
  • Investors could potentially add other worthy mentions in commodities and bonds to their watchlists.
  • 5 stocks we like better than NVIDIA.

Financial markets across the globe are going on a break, an undefined and unmeasured break. Warren Buffett released his quarterly holdings over the weekend. The record cash holdings of over $218 billion for Berkshire Hathaway Inc. NYSE: BRK.A isn’t the most exciting thing investors can focus on when pouring over the release. What was once one of Buffett’s largest holdings has now been cut in half, and the message behind it is just as important as the sale.

Apple Today

Apple Inc. stock logo
AAPLAAPL 90-day performance
Apple
$227.51 -1.49 (-0.65%)
(As of 09:53 AM ET)
52-Week Range
$164.07
$237.49
Dividend Yield
0.44%
P/E Ratio
37.42
Price Target
$235.25

Shares of Apple Inc. NASDAQ: AAPL are selling off by as much as 5% to start the trading week after the news release. Buffett sold 50% of his shares in the technology stock giant, and he quoted that the reasoning came mostly from a tax-efficient perspective. However, this is the soundbite that investors want to repeat in order to remain calm; the truth may be a lot different.

The stock market rotation is now well underway, as capital is starting to flee the technology sector and go into other spaces like bonds and commodities like gold. In fact, the iShares 20+ Year Treasury Bond ETF NASDAQ: TLT is up by over 1.2% on a day when the S&P 500 is down by roughly 3.7%. More than that, gold prices are now hovering near an all-time high, showing the market rotation is here to stay. Despite all the noise, here’s what investors can focus on to navigate this environment.

Buffett’s View is Alarming, But Also Spells Opportunity for Investors

The reason for the selling was pointed to Buffett's future view of tax rates for capital gains, reasoning that the government would raise these rates to close down on widening budget and trade deficits. Taking some profits off the table today (at lower tax rates) rather than tomorrow (at higher tax rates) makes sense.

However, Buffett is not known nor fond of timing the market, at least the economy. At the same time, other portfolio choices reveal what his actual view of the market might be. After buying up to 29% of Occidental Petroleum Co. NYSE: OXY in a nine-day buy streak, Buffett's optimism on the energy sector might tell investors all they need to know.

Higher oil prices will strengthen the energy sector, as analysts at Goldman Sachs expect them to reach $100 a barrel this year. However, commodities can only rally on perceived dollar weakness, and Buffett would be right to expect this.

More than that, Buffett also sold out of some of his Bank of America Inc. NYSE: BAC stake, as reported over the weekend. By taking a less optimistic view of the financial sector, he is doubling down on the coming dollar weakness and consumer environment for the United States economy.

Apart from all the selling and worrying, investors can look at the opposite end of the spectrum for opportunities. The infamous yield curve is now moving back to positive territory, an indicator that is 100% accurate in predicting rallies in the energy sector. This reiterates Buffett's view on the space.

Wall Street Analysts Support the Rotation and Recommend It

Looking at forecasts for earnings per share (EPS) growth in the next 12 months, namely between the technology and energy sectors, can give investors a much deeper insight.

Apple MarketRank™ Stock Analysis

Overall MarketRank™
96th Percentile
Analyst Rating
Moderate Buy
Upside/Downside
2.7% Upside
Short Interest Level
Healthy
Dividend Strength
Strong
Environmental Score
-1.97
News Sentiment
1.11mentions of Apple in the last 14 days
Insider Trading
Selling Shares
Proj. Earnings Growth
12.79%
See Full Analysis

Occidental Petroleum's EPS growth expectations are set at 32.2%, whereas Apple analysts only forecast EPS growth of 12.2% today. If, in fact, there could be dollar weakness, investors should stick with the companies that promise above-average growth.

Royal Gold Inc. NASDAQ: RGLD is another company helping Buffett's thesis. The gold miner is also getting some attention from Wall Street analysts today. Forecasting up to 24.9% EPS growth shows a better future for investors who are still hanging on to the artificial intelligence hype of yesterday.

Remembering that bonds could also be an attractive investment, especially if the Federal Reserve (the Fed) ends up cutting interest rates, investors shouldn't be surprised to see Stanley Druckenmiller sell out of NVIDIA Co. NASDAQ: NVDA and reallocate into the bond ETF mentioned above.

One last check for investors keeping up with Buffett's report: Why hold so much cash? This includes not only cash balances but also new liquidity found through selling Bank of America and Apple stock.

Buffett has historically held larger amounts of cash when he sees no buying opportunities in the market, and that means good news for investors sitting on the sidelines waiting for all the potentially good deals that will come if the S&P 500 selloff accelerates.

Apple Inc. (AAPL) Price Chart for Thursday, November, 21, 2024

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Berkshire Hathaway (BRK.A)
0.7234 of 5 stars
$701,133.81-0.3%N/A9.44N/AN/A
Apple (AAPL)
4.8152 of 5 stars
$227.51-0.7%0.44%37.42Moderate Buy$235.25
iShares 20+ Year Treasury Bond ETF (TLT)N/A$90.65+0.3%4.05%-7.14N/AN/A
Occidental Petroleum (OXY)
4.7075 of 5 stars
$51.19+0.5%1.72%13.33Hold$63.65
Bank of America (BAC)
4.8093 of 5 stars
$46.61+1.2%2.23%16.95Moderate Buy$44.26
Royal Gold (RGLD)
4.6504 of 5 stars
$149.35+0.5%1.07%34.25Hold$165.43
NVIDIA (NVDA)
4.789 of 5 stars
$148.15+1.5%0.03%69.49Moderate Buy$159.15
Compare These Stocks  Add These Stocks to My Watchlist 


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