Is Buffett Turning Away from Apple?
Warren Buffett is notably more transparent than most billionaire investors about his stock transactions. However, even with his openness, investors often find themselves speculating about Berkshire Hathaway’s stock moves. At Berkshire’s annual shareholder meeting in early May, Buffett addressed the sale of Apple shares. He hinted that the decision was influenced by potential changes in capital gains tax rates, aiming to secure some of Berkshire’s gains.
During his discussion on capital gains, Buffett informed shareholders, “I’m doing it at 21% this year, and we’ll be doing it at a slightly higher percentage later on. I don’t think you’ll actually mind the fact that we sold a little Apple this year.”
Nevertheless, this might not fully capture the rationale behind Berkshire’s reduction in its Apple holdings. Buffett has consistently praised Apple, viewing it as Berkshire’s third core business after its insurance sector and the BNSF railroad. Despite this, Berkshire routinely adjusts its portfolio, and Apple’s recent earnings report might shed light on the decision to sell.
For the fiscal second quarter of 2024, Apple reported a 4% year-over-year revenue decline to $90.8 billion, driven by a drop in iPhone sales and ongoing challenges in China. Although the services segment is growing, it’s not expanding quickly enough to uphold Apple’s previous growth trajectory. The company relies on product sales to return to growth. As overall growth decelerates, earnings per share (EPS) remained mostly flat, with improvements primarily due to significant share buybacks and the higher margins from the services sector.
