Just as Apple’s first-quarter performance had won back skeptical investors, Warren Buffett's surprise $US 20 billion sale of Apple shares will send shockwaves through share markets starting today.
The news, delivered in Berkshire's March quarter report and then discussed at the company’s annual meeting in Omaha, marks a major departure from his previous stance with the Apple investment – that it was long-term and that previous sales of shares had been a mistake.
Berkshire Hathaway reported that its Apple stake was worth $US 135.4 billion, implying around 790 million shares. That would mark a decline of around 13% in the stake. Apple was still Berkshire’s biggest holding by far at the end of the quarter.
The sale was much bigger than the 1% or 10 million shares sold in the three months to December.
This filing, when accounting for the change in Apple’s stock price, would imply Berkshire sold about 116 million shares.
No one realized Berkshire had been selling (Apple shares were down 11% in the first quarter, so the selling obviously had an impact).
After its better-than-expected result on Thursday, Apple shares were up more than 5% on Friday, pushing the wider market higher – Friday’s gain was also the gain for the week for the stock favored by Warren Buffett.
That wouldn’t have happened if the Sage of Omaha, as Buffett is known, had been exposed as being a seller.
The sale means Buffett will not get the full benefit from the one-cent boost in Apple’s dividend the iPhone maker revealed last week – and the record $US 110 billion share buyback.
With 905.6 million Apple shares at the end of December, the one-cent lift in the dividend would have seen Berkshire Hathaway getting just over $US 1 billion a year from the holding. Now it could be just under $US 800 million.
With the upsized buyback, Berkshire can afford to reduce its Apple stake and maintain its proportional stake in the iPhone company – and take a tax advantage as well. Buffett told Berkshire’s annual meeting in Omaha, suggesting that the sale was for tax reasons following sizable gains. He also implied the sale could be tied to him wanting to avoid a higher tax bill down the road if rates go higher to fund a ballooning U.S. fiscal deficit.
“It doesn’t bother me in the least to write that check, and I would really hope, with all that America’s done for all of you, it shouldn’t bother you that we do it. And if I’m doing it at 21% this year and we’re doing it a little higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year,” Buffett told the meeting.
Buffett continued to praise Apple at the meeting in Omaha, saying it was “extremely likely” that Apple will remain Berkshire’s largest holding at the end of 2024.
As we saw Apple's March quarter performance was better than expected, and that’s why the shares jumped on Friday to be up for the week.
But they are still down 4% for the year (and the S&P 500 is up more than 8%).
