Warren Buffett, the legendary investor behind Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), has recently made a series of bold moves with the conglomerate's portfolio.
The famed capitalist has reduced the firm's stake in Apple Inc (NASDAQ: AAPL), selling around 100 million Apple shares according to Berkshire filings.
In total, this represents about 25% of Berkshire's stake. Let's dive in and see. Berkshire's performance is seen alongside Apple for 2024 in the chart below.
Why is Warren Buffett selling Apple shares?
If only we were a neuron located inside Warren Buffett's investment cortex. One could only imagine the colosseum of knowledge available on markets.
Without the benefit of this location – or having a direct seat on Berkshire's investment committee – we won't exactly know why Buffett sold down the Apple stake, until the famed investor tells us so.
The sales come after Apple reported its Q4 earnings last week, posting revenue growth of 6% to $95 billion.
In total, Berkshire has sold more than 600 million shares in the iPhone maker this year.
But this isn't the first time Warren Buffett has trimmed Berkshire's Apple position. Nor should it come as a major surprise, given his language at the AGM on locking in gains while federal capital gains taxes remain lower.
And even after this major sell-off, Apple remains Berkshire's largest stock holding, valued at nearly US$70 billion.
But the conglomerate's strategy here adds to a list of stock sales made this month, including selling down Bank of America (NYSE: BAC) during the quarter.
These sales have left the company with a record $325.2 billion in cash, held in US Treasury bills of various maturity.
Cash is king? Or cash is trash?
The big question on everyone's lips is what Warren Buffett's moves signal for the broader financial markets. The investor has long said his favourite holding period is "forever", but this isn't his only holding period, either.
While he's long admired Apple, selling such a significant portion signals a move to build cash reserves for future opportunities.
Or it could be possibly to hedge against what he sees as high market valuations. Not to mention, Berkshire is an enormous insurance operation at its core.
According to CFRA Research, the cash hoarding "suggests a 'risk-off' mindset, and investors may worry what it means for the economy and markets", according to Reuters.
Berkshire also has to contend with the fact its investment universe is quite narrow. This means its options to deploy the cash are limited without a huge acquisition.
Foolish takeout
Warren Buffett's recent decision-making highlights the importance of a balanced portfolio. Even with Apple's strong performance, he's chosen to take some profits and bolster cash.
As Australian investors, Buffett's move is a reminder: Don't become overly reliant on even the strongest stocks.
This might reflect a broader caution, signalling that Buffett is preparing for potential market changes. But time will tell what the famed investor has up his sleeve.
Berkshire class B shares are up 28% in the past year.
