Warren Buffett Sold $130 Billion Worth of Stock

Warren Buffett's Berkshire Hathaway has significantly reduced its equity holdings, particularly in Apple stock, over the past year, primarily due to concerns about Apple's increasing valuation, potential future tax increases, and a lack of attractive investment opportunities. Buffett has instead increased Berkshire's cash position, primarily invested in US Treasury bills, as a more appealing alternative to the current stock market environment.

Apple Stock Reduction

• 00:00:00 Berkshire Hathaway has sold approximately $130 billion worth of stock in the past year, with the largest portion being Apple stock. This move is attributed to Apple's growing share of Berkshire's portfolio, leading to concentration risk, and a decrease in Apple's value rating. Apple stock sales have been ongoing for the past few quarters, surprising some investors who expected the sales to have concluded.

Valuation & Investment Opportunities

• 00:04:13 Apple's stock price has become increasingly expensive, reflected in metrics like its price-to-earnings ratio. Buffett sees limited attractive investment opportunities in the current market compared to the 4.5% return on US Treasury bills. The S&P 500's current earnings yield is below the risk-free rate of Treasury bills, indicating a lack of compelling investment opportunities.

Tax Considerations

• 00:06:01 Buffett's decision to sell Apple stock has been influenced by the potential for increased future corporate tax rates. The current US corporate tax rate is at a historic low, and Buffett anticipates a potential rise to more traditional levels. The potential impact of a tax rate increase on Berkshire's capital gains could be significant.

Cash Holdings & Risk-Free Returns

• 00:07:41 Berkshire Hathaway's large cash holdings, primarily in US Treasury bills, are not simply idle assets but a strategic allocation yielding a risk-free return of approximately 4.5%. Buffett believes this return is superior to many investment opportunities currently available in the stock market. By holding Treasury bills, Berkshire also insulates itself from a potential stock market crash and benefits from potentially rising bond prices during a downturn.

Buffett's Investment Strategy

• 00:10:02 Buffett's investment decisions are influenced by the size of his portfolio, making opportunities that would be attractive for smaller investors impractical for Berkshire Hathaway. However, individual investors can use stock screeners to identify stocks aligned with Buffett's criteria and emulate his investment strategy, including focusing on companies with high return on equity, growing profits, and competitive advantages.