For years, billionaire investor Warren Buffett has praised the tech giant Apple (NASDAQ: AAPL ) And its highly successful business model. And so investors may be confused by his company, Berkshire Hathaway (NYSE: BRKA )(NYSE: BRKB )The tech giant has been dramatically reducing its position in recent years.
However, Buffett recently revealed why Berkshire sold Apple stock, and that it had nothing to do with concerns about the company’s business or future growth.
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Apple has been a staple in Berkshire’s portfolio, but in recent years, Berkshire has not only been trimming its position in the tech company, but has been rapidly unloading it. Since its peak, Berkshire has reduced its stake in Apple by more than 75%. While it is still the top holding and the position is close to $60 billion today, it no longer accounts for more than half of the portfolio, as it did in the past.
And, this was a big problem for Buffett. “I wasn’t happy that it was bigger than the combination of everything.” Today, Apple stock makes up less than 19% of Berkshire’s portfolio. American Express Not far behind at 15%. A few years ago, the delta between the first and second holdings was very significant.
Another factor that may have played a large role in Buffett’s decision to sell Apple stock was likely the significant profit the company was sitting on from the position. Berkshire made more than $100 billion in profits from selling Apple stock. And with taxes and uncertainty about how capital gains might be treated in the future, protecting those profits may have motivated Buffett to sell early.
Over the past five years, both Berkshire and Apple have made solid investments, with the former returning 79% and the latter nearly doubling in value. Going forward, they still look like terrific investments to buy and hold.
Apple’s extensive ecosystem has enabled the business to grow without necessarily leading the company in innovation. Its iPhones are still iconic and are effectively the gateway for consumers to spend more on other Apple products and services. Berkshire, meanwhile, is under a new CEO in Greg Abel, but its vision remains the same. Investors may be less enamored with the stock now that Buffett has retired, but it’s still a good business to invest in given his careful and thoughtful approach to capital allocation and investing in quality companies.
