1. A Big Sell-Off: What Happened?

In the first quarter of 2024, Berkshire Hathaway sold 115 million shares of Apple, about 13% of its total stake, which amounted to a whopping $20 billion. But that was just the beginning. In the second quarter, Buffett's firm offloaded another 390 million shares, leaving Berkshire with only 300 million Apple shares by the third quarter. This massive sale boosted Berkshire’s cash reserves to a record $277 billion, a 47% increase from the previous quarter.

Despite these sell-offs, Apple’s stock performed well. In fact, its price rose nearly 26% from the end of 2023 to the end of the third quarter.

So, why was Buffett selling?

2. The Strategy Behind the Sales

Buffett explained that selling Apple shares made sense for a couple of reasons.

First, he believed that Apple’s stock was trading above its intrinsic value. With rising capital gains taxes expected, locking in profits at current tax rates became an attractive option. Second, Apple had grown to represent a massive portion of Berkshire’s portfolio, and Buffett prefers to keep a diversified range of investments.

Despite the sales, Apple's strong market performance suggests investor confidence in the company. However, this doesn't necessarily mean that Buffett sees unlimited upside in Apple’s future growth.

3. Apple’s Slowing Growth: A Key Concern

Apple’s growth has stalled in recent years, with its revenue plateauing at around $391 billion—nearly identical to the previous year’s figures.

Apple’s Revenue from 31/12/2009 to 01/10/2024

This marks a sharp contrast to Apple’s earlier years, when it consistently posted impressive growth driven by iPhone sales, services, and wearables. Today, however, Apple faces more competition and a saturated smartphone market, particularly in Asia where Android devices dominate.

Apple’s Vision Pro with augmented reality (AR) features

While Apple is trying to diversify into new areas like health technology, augmented reality, and even electric cars, these ventures have yet to bring in significant revenue. The company’s high valuation, coupled with slowing growth, might have led Buffett to question whether Apple still had the potential for big returns.

4. Buffett’s Calculated Exit

For Buffett, who is known for investing in companies with long-term growth potential, Apple’s current position may have seemed like a “success trap.” With limited room to grow and market pressures mounting, Apple might no longer offer the kind of returns it did when it was a smaller, faster-growing company.

By reducing his exposure to Apple, Buffett is not signalling a lack of faith in the company, but rather a strategic decision to rebalance his portfolio and avoid the risks of holding too much of one stock.

Conclusion: Apple's Future and Buffett's Wisdom

Apple’s challenge is unique: how do you continue growing when you're already one of the biggest companies in the world?

With its stock priced for continued growth, the company is now facing the tough reality of slower expansion in its core markets. Warren Buffett’s decision to sell off a large chunk of his Apple shares reflects his belief that, while Apple remains a powerful player, the company's future may not deliver the same explosive growth it once did.

For investors, this move is a reminder that even the most successful companies must eventually adapt or risk stagnation.

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