In his 2018 letter to shareholders, Buffett wrote that he hasn’t made a major purchase because “prices are sky-high for businesses possessing decent long-term prospects.” However, Berkshire’s second-quarter operating results offer a big clue as to what other trades may have been executed. More specifically, the fair value cost basis for the company’s “Commercial, industrial, and other” segment declined from $46.026 billion on March 31, 2024 to $45.006 billion on June 30, 2024. This segment excludes financial stocks and consumer products, but includes a host of other sectors and industries.
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A big clue from Berkshire Hathaway’s latest operating results strongly suggest he’s paring down one of his top holdings, and may have completely exited his stake in another key value stock. Buffett’s decision to reduce https://forexarena.net/ Berkshire’s Apple holdings provides some key lessons that individual investors can learn from when managing their own portfolios. American Express is an advertising partner of The Ascent, a Motley Fool company.
Are any of these stocks good picks for investors now?
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Speaking of whittling down, the recent sales have helped slim down the equity portfolio’s mammoth size.
Prediction: The Oracle of Omaha completely exited his company’s position in Louisiana-Pacific
I now feel that we are much closer to the point where increased size may prove disadvantageous. I don’t want to ascribe too much precision to that statement since there are many variables involved. What may be the optimum size under some market and business circumstances can be substantially more or less than optimum under other circumstances. There have been a few times in the past when on a very short-term basis I have felt it would have been advantageous to be smaller but substantially more times when the converse was true. And while Berkshire Hathaway is now a publicly traded company with a market cap over $330 billion — and Class A shares worth $222,850 per share — 50 years ago, Buffett was worried about getting too big.
Warren Buffett is expected to release the 50th edition of his letter to Berkshire Hathaway shareholders this weekend. Customers find the book a wonderful, informative read with the best annual letters ever written. Given how decisively Warren Buffett has crushed the S&P 500, it’s no surprise that investors eagerly await clues as to what he and his team have been buying and selling. Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.
Rocky Q4 2022, But Stock Outperforms
That makes the current valuation of 22 times operating earnings look a little expensive, though Buffett clearly believes the stock is undervalued. “With our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital,” Buffett wrote in his most recent shareholder letter. Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) reported a a net loss of $22.8 billion in 2022, due to market volatility. However, Berkshire’s “operating income” that excludes certain capital gains and losses, rose to a record $30.8 billion.
In the 2012 annual shareholder letter, Buffett wrote, “It’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants,” which is what he calls major acquisitions. Over 12 consecutive trading sessions (July 17 – Aug. 1), Buffett collectively sold 90,422,124 shares of Bank of America stock, totaling about $3.82 billion. There are a number of logical reasons for this position to be pared down by around 9%, including BofA’s higher book value and the potential for a rate-easing cycle to commence in the coming months — BofA is the most interest-sensitive of the money-center banks. But more than anything, this selling activity appears to be a warning to Wall Street that the stock market is incredibly pricey.
- “I bought the first shares of Berkshire in 1962 and it was a northern textile business destined to become extinct eventually,” Buffett says in the documentary.
- American Express is an advertising partner of The Ascent, a Motley Fool company.
- Investors can use that filing to gauge Buffett’s feelings about the U.S. economy for the rest of the year.
- “So I bought some stock with the idea that there would be another tender offer at some point, and we would sell the stock at a modest profit.” He first purchased shares on Dec. 12, 1962 for $7.50 each.
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Its total market value was nearly $354 billion at the end of last year, then it was a shade under $336 million this past March 31, and finally, as June came to a close, it stood at less than $285 billion. The point is, we don’t know yet exactly why he and his team decided to unload such a big chunk of Apple stock or whether they intend to keep selling or maintain most or all of their still-sizable stake. The Apple holding had melted away considerably, falling by almost 50% — again, using the yardstick of market value — to slightly more than $84 billion. The tech giant’s weight in the portfolio slimmed, too, down to less than 30%. Despite the setback on account of market volatility, Berkshire stock had a 4% gain for 2022, vastly outperforming the S&P, which fell 18.1% including dividends. Buffett was just an investor in the business like any other until a dispute arose.
The management of the company offered to pay Buffett $11.50 for his shares, but later lowered the amount. “Berkshire Hathaway was closing mills, and as they closed mills it would free up some capital, and then they would re-purchase shares,” he explains. “So I bought some stock with the idea that there would berkshire hathaway letters to shareholders be another tender offer at some point, and we would sell the stock at a modest profit.” He first purchased shares on Dec. 12, 1962 for $7.50 each. “I bought the first shares of Berkshire in 1962 and it was a northern textile business destined to become extinct eventually,” Buffett says in the documentary.
In his much awaited shareholder letter, Buffett reiterated his faith in the American economy and took aim at overpriced share buybacks. During Berkshire Hathaway’s annual shareholder meeting in early May, Buffett suggested that corporate tax rates were liable to increase in the coming years. Given the sizable unrealized investment gains in Apple Berkshire’s investment team is sitting on, Buffett believed that locking in some gains now, at a lower tax rate, would be, in hindsight, viewed favorably by the investing community. To be fair, Warren Buffett has a logical scapegoat to justify Berkshire’s record-breaking selling activity. During his company’s annual shareholder meeting in May, the Oracle of Omaha opined that corporate tax rates were likely headed higher in the future.
We do not include the universe of companies or financial offers that may be available to you. The company’s dividend yield and track record of dividend hikes are impressive. I also like Chevron’s potential growth opportunities in carbon capture and storage. Buffett doesn’t own many high-yield dividend stocks, but Chevron is one of the few. Although Buffett trimmed his position in the oil giant in the first quarter of 2024, the move followed a large purchase of the stock in the fourth quarter of 2023.
Indeed, the average iPhone sells for three times more than the average Android smartphone. Apple has a strong presence in smartphones, personal computers, tablets, and smartwatches, and the company also operates the leading mobile app store and it has one of the fastest-growing advertising businesses in the U.S. And when a stock is responsible for over half the weight of a portfolio, it makes that portfolio vulnerable — what if Apple hits a rough patch?