Over the years, there have been several occasions when legendary investor Warren Buffett has bought or sold a stock that I’ve also had in my portfolio. Although I don’t blindly follow everything he does, any change from such a savvy investor make me reconsider why I own the particular share. So when I saw over the weekend that he’d sold a good chunk of Apple (NASDAQ:AAPL) stock, I started wondering if I should do the same.
Reducing his stake
According to filings published on Saturday (3 August), Buffett sold around 390 million Apple shares, which equated to roughly half his holding in the tech giant. This was via Berkshire Hathaway, the company that he uses to house his large investment portfolio.
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The filings don’t give us Buffett’s direct thoughts on why he made the decision, so I have to try and read between the lines here.
Apple was the largest holding in his portfolio by some distance. As of the end of Q1, it accounted for 40.8% of his portfolio. I did find it slightly odd in the past as to why Apple made up such a large amount overall. After all, it’s not particularly diversified. Should the stock have underperformed, it could have ruined the entire year.
Therefore, by reducing the amount he owns in Apple, Buffett makes his portfolio more balanced. The monetary value of his stake means that it’s still the largest holding, but it makes up a much smaller percentage of the overall investment pot.
Banking some profit
Another point worthy of note is that he reduced his position, but didn’t exit it entirely. If Buffett was really worried about Apple stock tanking, he would have sold everything. So the fact that he has kept a big chunk makes it look like he’s simply banking some profit.
He first started to buy Apple shares back in 2016. Since then, the price has risen significantly. Even over the past year it’s up 15%. So it’s logical and sensible to reduce some risk of the stock falling by selling some of it now.
As for the rest, I imagine Buffett will continue to hold it for the long term. After all, Apple is continuing to advance as a business. In particular, it’s pushing more and more into generative artificial intelligence (AI). This was an area of focus in the latest quarterly earnings call.
In terms of financials, revenue for the past quarter was up 5% versus the same time last year. Earnings per share jumped by 11%. With new product launches (such as the iPhone 16) expected in the next few months, demand going forward also looks healthy.
Not following Buffett this time
One reason why I could copy Buffett is due to the risk of a short-term correction in Apple shares. US tech stocks are under pressure at the moment as investors are scared that the US could enter a recession later this year. Growth stocks are typically seen as risky to own in this environment.
As we currently stand, I’m going to hold my Apple shares. I’m confident that the business is still growing, as well as making big moves in AI.
