Warren Buffett’s Berkshire Hathaway has been selling more shares of Apple and other companies, trimming its stock buybacks, and piling up cash. As of September, the company had $352.2 billion in cash reserves, a 17.4% increase from the previous quarter.
The reasons behind this move are twofold: Buffett believes that stocks are trading above their intrinsic value and expects capital gains taxes to rise. He has stated that he will only buy more stock when the price is below his conservatively determined value. This sentiment has been echoed in recent months, with Buffett telling investors to expect him to sell shares and build up reserves.
Buffett’s concerns about higher capital gains taxes are also driven by his expectation of a bigger fiscal deficit and potential tax hikes. He believes that the U.S. government may choose to tackle this issue through increased taxes rather than reducing spending.
However, for investors with a longer time horizon, such as those who adopt an index investing strategy, Buffett’s cash-raising move may be seen as a more nuanced situation. In this case, investors can use lower prices triggered by a market drop to buy stocks at a discounted rate.
With Apple stock having lost 4.3% of its value since the end of September, investors are left wondering whether they should head for the hills or keep buying. Chris Bloomstran, president and chief investment officer of Semper Augustus Investments Group, is not bullish on Apple’s prospects, citing the company’s overvalued stock price.
Despite this, Buffett remains optimistic about the long-term market performance, as evidenced by his continued investments in high-quality companies. The question now is how investors will respond to this shift in strategy and whether they can navigate the complexities of the current market landscape.
Source: https://www.forbes.com/sites/petercohan/2024/11/04/why-buffetts-berkshire-sold-apple-stockholds-352-billion-in-cash