Is This Why Berkshire Reduced Apple Stake By 18% In Q1? Buffett Gives Convincing Reason.

Editor’s note: This story has been updated to include Warren Buffett’s explanation behind Berkshire’s current Apple stake.

Warren Buffett’s Berkshire, Inc. BRK BRK trimmed its position in its key core holding, Apple, Inc. AAPL, a 10-Q report for the first quarter filed with the SEC on Saturday showed.

Paring Equity Bets: Berkshire’s equity securities investment dropped from $353.84 billion in Q1 2023 to $335.86 billion in Q1 2024. Sector-wise, the firm reduced its exposure to banks, insurance and finance as well as consumer products, while upping its stakes in commercial, industrial and other stocks.

The proportion of money invested in Berkshire’s five core holdings, namely Apple, Bank of America Corp. BAC, American Express Co. AXP, Coca-Cola Co. KO and Chevron Corp. CVX fell from 79% in the year-ago quarter to 75%.

The comparisons vs. a year-ago are as follows:

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The Apple Math: Apple shares have underperformed this year, shedding 4.63% for the year-to-date period and 10.82% for the first quarter. The decline came amid fears that the company’s fundamentals would deteriorate amid slow uptake of iPhones in its key China market and elsewhere.

Apple met modest expectations in the March quarter but reported a decline in revenue and earnings compared to the previous year. The company issued a June quarter forecast that was not as worse as feared. That said, investors are still skeptical as the company has not been very proactive with product improvements. Analysts have hinged hopes of a rebound on the launch of the AI-enabled iPhone 16 later this year and the company’s late entry into the AI arena.

Berkshire’s $135.4 billion Apple stake in the first quarter suggests the firm may have held 744.65 million shares at the end of the first quarter. The calculation is based on Apple’s average first-quarter stock price of $181.83. This is a 17.71% reduction from the 904.87 million Apple shares it held at the end of the fourth quarter.

The precise number of Apple shares Berkshire holds will be known when the firm files its 13F report for the first quarter with the SEC.

This marked the second straight quarter that the firm has cut its Apple stake. In the fourth quarter, the firm lightened its Apple stake by 10 million shares.

Buffett’s Take: When asked at the annual shareholder meeting if his view of the economics of Apple’s business or the company’s attractiveness as an investment has changed, Buffett replied that it has not.

“Charlie [Munger] and I looked at common stocks or marketable equities … as being businesses and so when we own a Dairy Queen or whatever we own it may be, we look at it as a business,” he said.

“We can buy really wonderful companies in the market, as businesses we can’t buy all of them.”

The billionaire said he does not attempt to predict market or pick stocks. He referred to the book “Intelligent Investor” by Benjamin Graham, which says that “if you look at stocks as businesses and treat the market as something that doesn’t tell you, isn’t there to instruct you, but it’s there to serve you, you will do a lot better over time.”

This is better than taking charts and listening to people talk about moving averages, he said.

Buffett mentioned that although the approach has evolved with the company’s capital, the fundamental principle remains the same.

As such, the investment guru clarified this is the reason why Berkshire still owns Apple.

“We will own, unless something extraordinary happens, we will own Apple, American Express and Coca-Cola when Greg [Abel] takes over this place,” he said.

“We will end up unless something dramatically happens that really changes capital allocation strategy, we will have Apple as our largest investment.”

Under current conditions, Buffett stated that he wouldn’t mind building the cash position, considering the alternatives available in the equity markets.

Apple ended Friday’s session up 5.98% at $183.38, according to Benzinga Pro data. Berkshire’s Class A shares fell 0.56% to $603,000.

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