Berkshire Hathaway, led by Warren Buffett, has divested $133 billion in stocks during the initial three quarters of 2024. This divestment includes a reduction in its investment in Bank of America, a key asset for Berkshire in the past years. By the conclusion of Q3, Berkshire Hathaway’s top four holdings comprised Apple valued at $69.9 billion, American Express at $41.1 billion, Bank of America at $31.7 billion, and Coca-Cola at $28.7 billion.
During the 2024 shareholders’ assembly, Buffett expressed that he found it “quite appealing” to enhance cash positions as the stock market continues its upward trajectory. With increasing valuations, the availability of quality businesses at reasonable prices has diminished. Importantly, Buffett has not sold any shares of Coca-Cola or American Express for more than 25 years.
Coca-Cola stands as one of Berkshire’s most enduring investments, having been acquired in the late 1980s. Despite evolving consumer tastes, Coca-Cola has managed to sustain growth through an extensive range of beverages. The corporation has consistently increased its dividend for an impressive 62 years in a row.
Meanwhile, American Express has been part of Berkshire Hathaway’s portfolio for 30 years. Buffett admires the firm for its robust brand loyalty and its expenditure-driven business model.
Berkshire reduces Apple holdings, increases liquidity
American Express has demonstrated strong financial performance, achieving record revenues in the third quarter and reflecting an 8% annual growth. In Q3 2024, Berkshire Hathaway decreased its Apple stake by 25%, equating to 100 million shares, now holding 300 million shares in total. The company also liquidated some of its shares in Bank of America.
Buffett is renowned for his buy-and-hold investment philosophy, often retaining stocks for many years or even decades. Despite a recent increase in trading activity, Buffett remains dedicated to identifying and acquiring high-quality stocks at fair prices and maintaining them long-term. Nevertheless, Buffett and his Berkshire team have been gradually selling their Apple shares each quarter since Q4 2023.
When Berkshire initially invested in Apple in 2016, it had a price-to-earnings ratio of approximately 10.6. Currently, Apple trades at 39 times its trailing earnings, which diminishes its value appeal. At Berkshire Hathaway’s 2024 annual meeting, Buffett discussed capitalizing on gains while federal tax rates remain at historically low levels. Given Donald Trump’s victory in the presidential election, a tax increase is unlikely in the next four years.
Investors may want to reconsider their Apple positions as the stock has become more costly without the corresponding business performance to justify the high valuation. Whether they choose to follow Buffett’s example in selling Apple shares will depend on their individual investment strategies and perspectives on the market.
