Well if last week's seismic sell-off couldn’t get any weirder, Grandpa Warren has taken it upon himself to leave Wall Street buzzing louder than a friggin Kardashian pregnancy rumor. As the S&P 500 and Nasdaq plummeted -2.06 and -3.06 due to nonfarm payrolls and labor market concerns, the Oracle of Omaha himself seems to be bracing for impact by slashing -50% of his beloved Apple stake. 

(Source: CNN) 

As every well informed investor knows, Apple has been one of the main cornerstone’s of Berkshire's portfolio over the years. However, this latest move to cut his Apple stake from a hefty 789 million shares to about 400 million has analysts scratching their heads harder than a dog with fleas. Especially since Apple was one of the very few tech stocks to end the week unscathed as the stock closed +1.17 on Friday. So with that said, what’s Buffet seeing that we aren’t?  

(Source: Giphy) 

Well for starters, Apple has no doubt been on a tear this year rallying +18.43% YTD. With the announcements of their new Apple Intelligence, and growing anticipation of the technology being implemented into their products - Apple’s $3.43 trillion market cap has inflated more than my ego after three compliments while taking over 40% of Berkshire’s entire portfolio. 

(Source: Motley Fool) 

However, even though Apple certainly beat Q3 expectations by reporting an earnings per share of $1.40 on a revenue of $85.5 billion, barely beating analyst whisper numbers of $1.35 EPS and $84.4 billion revenue - iPhone revenue (Apple's flagship product obvi) dipped to $39.2 billion, which is down -1.01 from last years $39.6 billion. 

(Source: Yahoo Finance) 

The main headache for Apple iPhones sales came from China as the company continues its fight to regain market share from homegrown rivals like Huawei. But with revenue out of Greater China topping out at only $14.7 billion, just shy of analyst expectations of $15.2 billion, this may have shown yet another crack in investor confidence as revenue from China dipped -6.36 year-over-year. 

(Source: 9GAG)

So naturally, while Apple still seems to have a grasp over its dominance in the market, these recent financial’s suggest that Buffet not only knew this was coming, but it left him feeling uneasy about keeping such a large amount of Berkshire’s cash in one single company. 

In addition, let’s not forget the broader economic landscape we are currently facing as we head into tomorrow’s trading. With Buffett's latest transaction, Berkshire’s cash reserves have swelled to nearly $277 billion, signaling that worries of rising employment rates and a Fed misstep is now playing more of a role in his decision to sell than just Apple's hiccups in revenue. 

(Source: CNN) 

For instance, as of Friday’s nonfarm payroll report tells us, only 114,000 jobs were added last month, which was well short of the average 175,000 forecast that economists had penciled in. Adding, the new unemployment rate jumping to 4.3% (a near three-year high, ooof), it’s clear Buffet is playing it safe as we face the headwinds of correction territory as some believe a recession is looming.

(Source: Giphy) 

With that said though, despite all this selling, Buffett still remains a huge fan of Apple. He’s called it one of the best businesses he’s ever invested in—which is high praise from a guy who’s been in the game since the Beatles were together. But in addition to all the factors mentioned above, including the federal tax rate on capital gains chilling around 21% (thanks Biden), it’s clear Buffet is likely just getting his ducks in a row. 

(Source: Giphy) 

Yet, while his expectation is that Apple will continue to be a major player in Berkshire’s portfolio, it makes me wonder if he’s really drank the “recession fear” Kool-aid, or if he actually does know something nobody else does. Obviously, only time will tell as we resume trading tomorrow morning, but with this -50% cut in Apple, Buffet is definitely one of the main topics of Wall Street gossip this weekend. 

(Source: Giphy) 

So for all you Apple investors, I’m not saying follow Buffett's strategy here, but keep in mind the dude has been in the game since 1965. If he’s selling now, there’s always a reason. Sure, the economic landscape is growing uncertain, and yes, iPhone sales are down while iPad sales are flourishing -  but after his massive selling of Bank of America last month (ironically, a few weeks before UBS pulled a lawsuit on the bank), it does make me wonder if he really does see something in Apple’s future that most investors don’t. 

(Source: Investing.com)

If you’re tin foil hats just turned on, you’re welcome. You can never be more cautious as an investor than right now… because when the big guys do something drastic, there’s always a core reason behind it. 

In the meantime, stay safe and have a wonderful Sunday, friends! Until next time… 

 

Stocks.News holds positions in Apple as mentioned in the article.