However, Buffett has cautioned investors to ignore that figure because it includes gains and losses (both realized and unrealized) on stocks. In the June quarter, Berkshire recorded $28 billion in unrealized losses versus $24 billion in unrealized gains in the same quarter last year. Berkshire reported reasonably good financial results in the June quarter.
Two stocks Buffett is likely selling that Wall Street doesn’t know about yet
Berkshire’s 13F detailing its activity during the June-ended quarter is slated for release after the closing bell on August 14. Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. When Berkshire berkshire hathaway letters to shareholders Hathaway (BRK.A 1.10%) (BRK.B 1.18%) CEO Warren Buffett speaks, the whole of Wall Street pays close attention. Investors looking to strengthen their portfolio with a defensive stock should consider buying a small position in Berkshire Hathaway today. Still, banking is a cyclical industry, and veteran finance sector investor Buffett has a good sense for economic cycles (and may think this one’s about to turn).
The Coca-Cola Company
- When Berkshire Hathaway (BRK.A 1.10%) (BRK.B 1.18%) CEO Warren Buffett speaks, the whole of Wall Street pays close attention.
- Treasury yields have soared to the highest level since the 2008 financial crisis after an aggressive Federal Reserve rate hike cycle.
- The company continues to be robustly profitable and is sure to remain so.
- Buffett, now 92, has limited his public appearances in recent years and the letter marks his first major communication with shareholders since the company’s annual meeting last April.
- CNBC estimates that Berkshire’s stake in Apple declined to 400 million shares in June 2024, a 55% reduction from 905 million shares in December 2023.
- It also has avenues for growth, particularly in the area of services revenue.
That goes double for their latest action — a massive reduction in the Apple (AAPL 0.06%) position held in the bulging equity portfolio of Buffett’s investment vehicle, Berkshire Hathaway (BRK.A 1.06%) (BRK.B 1.18%). Here are the particulars as we know them so far and my take on how the shift might affect both Apple and Berkshire. Perhaps other shareholders should unload the tech giant’s equity, too.
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“Interest rates are to asset prices, you know, sort of like gravity is to the apple,” Buffett previously said at Berkshire’s annual meeting in 2013. His comments highlighted the “gravitational pull” that higher rates can have on equity, especially after years of near-zero interest rates. However, Buffett made no meaningful changes to the company’s portfolio that would suggest a fearful outlook. The company’s operating earnings, exclusive of capital gains or losses, for the fourth quarter of 2022 fell to $6.7 billion, down 14% from the previous quarter.
Berkshire a Seller in Q4, but Top Holdings Remain
As evidence, Berkshire’s book value per share — a good measure for changes in intrinsic value — compounded at 12% annually over the last five years, nearly keeping pace with the 13.1% gain in the S&P 500. Going forward, Wall Street expects Apple to grow earnings per share at 10% annually through fiscal 2025. That makes its current valuation of 33.5 times earnings look outrageously expensive.
NYSE: BRK.B
Plus, Bank of America was an opportunistic buy for Berkshire back in the day, and it might have never been intended for a super long-term hold. The textile company, headquartered in New Bedford, Mass., was in bad shape, but Buffett saw an opportunity where others saw a lost cause. Without the ability to make as many major purchases as he’d like, Buffett has bumped up allocations in a number of his favorite stocks over the last decade, which included companies such as American Express, Coca-Cola, IBM, Wells Fargo, and Apple.
Including the present, there have only been a half-dozen occasions in more than 150 years where the Shiller P/E ratio has topped 30 during a bull market. The previous five instances were all followed by plunges of 20% to 89% for Wall Street’s major stock indexes. Altogether, $75.536 billion in net equities were sold in the second quarter, which is the most Berkshire Hathaway has ever sold in a single quarter. https://forexarena.net/ “The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code.” “But we still have plenty of cash and are generating more at a good clip. So it’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants.”
However, the iPhone maker has paid and increased its dividend every year since 2012. Roughly 72% of Buffett’s Berkshire Hathaway portfolio is invested in just five dividend stocks. Unlike the traditional P/E ratio, which divides a company’s share price into its trailing-12-month earnings per share and is easily the most-popular valuation metric, the Shiller P/E is based on average inflation-adjusted earnings from the prior 10 years. Examining a decade’s worth of earnings history helps to smooth out one-off events that can adversely impact traditional valuation models. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway.
The Oracle of Omaha may have disappointed many investors with his latest annual shareholder letter, which failed to provide an update on the economy. Buffett, now 92, has limited his public appearances in recent years and the letter marks his first major communication with shareholders since the company’s annual meeting last April. Investors had been hoping for an update on the U.S. economy and Buffett’s thoughts on inflation and a potential recession but were left to read between the lines. With the company’s record return for operating earnings, Buffett reminded investors that he and long-time partner Charlie Munger, 99, were “business pickers,” “not stock-pickers”. Going forward, Wall Street expects Berkshire to grow operating earnings at 12% annually over the next three years.
Bringing the existing-home sales market to a crawl opened the door for new home sales to thrive. With the above being said, it’s a near-certainty that Buffett sold close to 4 million shares of oil and gas stock Chevron (CVX 0.20%) during the second quarter. Buffett may still love Apple’s business characteristics as much as he did when he established the position, but there’s a big difference between paying a P/E multiple of 10 versus 30. Companies need to grow earnings at a high rate to justify their high multiples and for a company as large as Apple, that’s not as easy as it once was.
There’s a good chance, in my view, that a multi-year surge of iPhone upgrades could be on the way as customers buy new smartphones to take advantage of the artificial intelligence features. Bank of America (BAC 0.66%) remains Buffett’s second-biggest position, at least for now. That could soon change, though, with Buffett selling big chunks of his BofA position in recent days.
“Berkshire increased its ownership interest last year in each of its ‘Big Four’ investments – American Express, Coca-Cola, IBM and Wells Fargo,” Buffett wrote in the annual shareholder letter. Investors can use that filing to gauge Buffett’s feelings about the U.S. economy for the rest of the year. Berkshire’s investments in banking stocks have been trimmed as the Federal Reserve slows its rate hike pace and that will add a headwind to the banking sector. The Taiwan Semiconductor stake was only purchased in Q3 and may hint at geopolitical fears related to U.S.-Chinese diplomatic tensions. Despite selling these holdings, Berkshire Hathaway has not substantially increased its cash position and Buffett is happy to hold onto his prized assets. Warren E. Buffett first took control of Berkshire Hathaway Inc., a small textile company, in April of 1965.