Queue up the bears.
Berkshire Hathaway’s (BRK-A, BRK-B) cash pile hit another record high of $189 billion in the first quarter, the industrial giant said in its earnings release on Saturday.
That massive war chest will likely total $200 billion by the end of the current quarter, Buffett told shareholders today at the packed CHI Health Center.
According to one veteran value investor, such a pile of greenbacks signals that Buffett is currently “poor” on the stock market.
“Buffett is pessimistic about the stock market. “He’s showing this by increasing his massive cash holdings to $200 billion, selling Apple stock (AAPL) and saying he doesn’t see any bargains,” Bill Smead, CIO of Smead Capital Management and a longtime Buffett watcher, told me. on the site of capitalism’s Woodstock.
Berkshire’s decision to reduce its stake in Apple and increase the company’s liquidity is a move that Buffett believes makes sense given the current macroeconomic environment.
“I don’t think anyone sitting at this table has any idea how to use it effectively, and that’s why we’re not using it,” Buffett said in response to a shareholder question about why Berkshire isn’t putting the cash reserve to work.
“As the world becomes more complex, complex and interconnected, more can go wrong,” and you want to be able to “act when that happens,” Buffett added.
Apple and these other Buffett stocks
The bears have some meat to feast on, compliments of Buffett.
Berkshire reduced its stake in Apple by about 13% in the first three months of the year, marking the second straight quarter in which the group reduced its stake in the iPhone maker.
As of March 31, Apple accounted for about 40% of Berkshire’s huge stock portfolio, which was worth a total of $135.4 billion.
Berkshire reduced its position in Apple as the tech giant has struggled in recent quarters and the stock’s valuation remains high. The stock fell about 10% in the first three months of the year, weighing on Berkshire’s quarterly results.
While some initially viewed Buffett’s decision to reduce Apple’s stake as a sign that his stance on the tech big has changed, one analyst told Yahoo Finance that “a little fall from the top doesn’t hurt.”
“This doesn’t worry any of us as much because Apple had such a large position in the 13-F portfolio at the end of 2023, so anything that reduces that exposure is good from a diversification perspective,” Morningstar analyst Greggory Warren told me at the meeting.
The legendary investor was also quick to reassure shareholders of his confidence in Apple.
“At the end of the year, I think it’s extremely likely that Apple will be the largest common stock holding we have right now,” Buffett told a packed audience that included Apple CEO Tim Cook.
Buffett compared Apple to two of Berkshire’s best-known top holdings: Coca-Cola (KO) and American Express (AXP). While he called Coca-Cola and American Express “wonderful companies,” he noted that Apple is an “even better company.”
While Buffett remains bullish on Apple, the company faces near-term headwinds.
China’s weakness has been the focus of Apple investors as the company loses market share to domestic companies. Even a more cautious US consumer has not improved investor sentiment.
“It’s easy to blame the broader consumer environment, but there’s also a market share dynamic that’s coming from Huawei and others becoming extremely competitive,” Christine Phillpotts, senior vice president of emerging markets equities at Ariel Investments, told me Berkshire’s annual meeting.
It’s a trend that Phillpotts says is likely to accelerate as domestic players continue to “increase the value proposition.”
Apple shares have fallen 4.8% year-to-date despite upcoming AI announcements, falling far short of the S&P 500’s 8% rise.
Buffett’s cash hoard suggests other stocks could follow Apple’s lead and decline over the course of the year.
Curious about what Apple is up against in the AI competition? Yahoo Finance Editor-in-Chief Brian Sozzi discusses Amazon’s AI plans with AWS CEO Adam Selipsky in a new episode of the Opening Bid podcast below.
Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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