When yesterday we said, when discussing Buffett's ongoing liquidation of his Bank of America stake, that "Berkshire's rising cash stockpiles merely reflect the firm's inability to find deals in today's overvalued and weak economic environment", little did we know just how accurate that would be, because fast-forwarding just one day later we find that far from only dumping Bank of America, the 93-year-old Omaha billionaire had been busy quietly dumping his most iconic holding in an unprecedented selling spree that sent Berkshire's cash pile soaring by a record $88 billion to an all time high $277 billion at the end of Q2.
As shown in the chart below, in the second quarter (which ended June 30, and thus just two weeks after the Apple's Developer Conference which took place on June 10 and which was - at least on the day of - a total bust), Berkshire sold a net $75.5 billion worth of stock, the bulk of which we now know, came from Buffett's liquidation of half his Apple shares.
While there was no 13F filed yet to go with the Berkshire's 10Q, the company did provide a snapshot of its top holdings, revealing that as of June 30 it held only $84.2 billion in Apple stock, down sharply from $135.4 billion as of March 31 and $174.3 billion as of Dec 31, 2023. This translates into just 400 million shares of AAPL held as of June 30, down almost 50% from 789.4 million as of March 31 and 905.6 million as the end of 2023.
The rest of Berkshire's top 5 holdings (Bank of America, American Express, Coca Cola and Chevron) was left untouched in Q2, meaning that Buffett clearly decided that it was time for Apple to go (we have since learned that subsequent to the end of Q2, Buffett also started to dump a large portion of his Bank of America shares where he is the single largest shareholder).
While Berkshire's cash balance rose by a record $88 billion - where proceeds from the sale of Apple were the bulk of the new cash - the company also generated substantial cash from its own operations, and in Q2 Berkshire reported operating earnings of $11.6 billion, up from $10 billion for the same period a year ago.
Berkshire has for years struggled to find ways to deploy its mountain of cash in a sluggish deal environment, lamenting the lack of cheap opportunities. At the firm’s annual shareholder meeting in May, Buffett said he wasn’t in a rush to spend “unless we think we’re doing something that has very little risk and can make us a lot of money.” It now appears that not only was Buffett not in a rush to spend, but taking advantage of the AI bubble, he has been aggressively liquidating his biggest holding.
What is perhaps most remarkable is when and how Buffett dumped half his Apple holdings: Berkshire managed to offload a stunning $84 billion, or some 390 million shares, in AAPL at a time when the stock was appreciating rapidly, and especially after the meltup following the WWDC24 developer conference. In other words, the smart money was furiously dumping to retail, because as we noted at the time, hedge funds were certainly not buying tech at this time, as we reported on July 1 in "Getting Out Of Dodge: Hedge Funds Are Selling And Shorting Stocks At The Fastest Pace In Two Years", almost as if they had notice that Buffett was dumping...
It also makes one wonder if Buffett may not have had something to do with Apple's bizarre performance after the WWDC24 conference. As a reminder, the kneejerk response to Tim Cook's "earthshattering" reveal of a chatGPT Siri was a huge dud, with the stock dumping on the day of WWDC24.
It wasn't until the next day when, thanks to a relentless barrage of bullish sellside reports and kickstarted by a furious buyback order from the company itself, the stock proceeded to surge and regain the world's most valuable slot from Microsoft. Almost makes one wonder if Buffett didn't call in a few favors from his banker friends on this one...
Finally, it's not just AAPL that Buffett believes is overvalued and is aggressively dumping: the billionaire clearly believes the entire market is way expensive, and Berkshire bought back only $345 million of its own shares during the quarter, the lowest amount since the company changed its buyback policy in 2018. It's hardly a surprise why: as we noted in "Berkshire's Growing Cash Pile Has A Hidden Message On Stocks" the Buffett Indicator has rarely signaled a more expensive market.
Bottom line: unlike October 2008, when Buffett led the clarion call to "Buy American", this time he is selling American at a never before seen pace.
Are you?
One thing we know, Buffett is fearful.
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