Warren Buffett’s latest earnings report has sent shockwaves through the market, revealing significant sell-offs in two of his favorite stocks: Apple (AAPL) and Bank of America (BAC). The conglomerate’s 13F filing, due November 14, won’t reveal the exact reasons for these moves, but the fair value of Berkshire’s largest holdings offers some clues.
As of September 30, Berkshire decreased its stake in Apple by 25% and Bank of America by 23%. This marks a significant shift from the company’s buying spree throughout the first nine months of the year. According to Buffett, he views these stocks as overvalued.
Apple trades at 36 times earnings, while Bank of America is trading at 1.6 times its tangible book value – a level close to its five-year average. These metrics are far from historic norms and signal that Buffett may be preparing for a potential market correction.
Berkshire’s reduced exposure to these stocks has led to an increase in cash and short-term Treasury bills, with the company now holding over $320 billion of such assets. This move is seen as a hedge against potential market downturns.
While Buffett’s actions don’t necessarily predict a meltdown, they do signal a broader shift in the market. As billionaire hedge fund manager David Einhorn notes, Buffett has a knack for timing the market and may be advising his team to take a step back.
As retail investors, it’s essential to reevaluate our own portfolios and consider whether we’re investing in stocks trading at high valuations. This exercise can help build confidence and make us better investors.
Note: The article has been simplified and condensed while retaining essential information.
Source: https://www.fool.com/investing/2024/11/06/billionaire-warren-buffett-just-sold-more-than-300