Buffett Calls The Top: Berkshire Dumps 100 Million Apple Shares As Unprecedented Selling Spree Boosts Cash To Record Quarter Trillion Dollars

Back in August, when discussing Buffett’s ongoing liquidation of his Bank of America stake, we said that “Berkshire’s rising cash stockpiles merely reflect the firm’s inability to find deals in today’s overvalued and weak economic environment”, little did we know just how accurate that would be, because just one day later we and the rest of the market were stunned to learn that far from only dumping Bank of America, the 94-year-old Omaha billionaire had been busy quietly liquidating his most iconic holding in an unprecedented selling spree that sent Berkshire’s cash pile soaring by a record $88 billion to an all time high $277 billion at the end of Q2.

That was just the beginning, however, and this morning we subsequently learned that through the end of Q3, Berkshire’s unprecedented cash build continued, and the world’s largest conglomerate added another $48 billion to its cash – through both “harvesting” (i.e., selling of existing holdings) and cash from operations, taking it to a record $325.2 billion, or nearly a quarter trillion in cash. As shown for context in the chart below, Berkshire has nearly doubled its cash holdings from $168 billion at the start of the year to a staggering $325 billion 9 months later, up 94%!

The bulk of the new cash came from sales: in the third quarter, Berkshire sold a net $34.6 billion worth of stock, following the record $75.5 billion in Q2 liquidations, the bulk of which we now know came from Buffett’s sale of half his Apple shares. In other words, the third quarter was the 8th consecutive quarter in which Berkshire has been a net seller of stocks.

And the selling continued: while there was no 13F filed yet to go with the Berkshire’s 10Q, the company provided a snapshot of its top holdings, revealing that as of Sept 30 it held only $69.9 billion in Apple stock, down a quarter from the $84.2 billion as of June 30, down 62% from $135.4 billion as of March 31 and down 70% from the $174.3 billion as of Dec 31, 2023. This translates into just 300 million shares of AAPL held as of Sept 30, less than a third of what Berkshire owned at the end of 2023, and 30% of Buffett’s peak AAPL holdings of 1 billion shares as of 2018. 

Buffett said in May that Apple would likely remain Berkshire’s top holding, indicating that tax issues had motivated the sale. “I don’t mind at all, under current conditions, building the cash position,” he said at the annual shareholder meeting. It was unclear if BRK shareholders understood that to mean a sale of 70% (and rising) of the AAPL holdings.

Going down the list, with the exception of Bank of America (where Buffett is the single largest shareholder) which we already knew was also being aggressively sold – and in Q3 Buffett confirmed that he took down his BAC holdings by 23%, from 1033 million shares to 799 million which in turn made the BAC stake his 3rd largest after American Express –  the rest of Berkshire’s top 5 holdings (American Express, Coca Cola and Chevron) was largely untouched in Q3, meaning that Buffett clearly decided that it was time for Apple and Bank of America to go (we have since learned that subsequent to the end of Q2, Buffett also started to dump a large portion of his Bank of America shares where he is the single largest shareholder).

While Berkshire’s cash balance rose by a record $35 billion – where proceeds from the sale of Apple and Bank of America were the bulk of the new cash – the company also generated substantial cash from its own operations, and in Q3 Berkshire reported operating earnings of $10.09 billion, down from the $11.6 billion in Q2 and down 6% from a year ago, as insurance underwriting earnings slumped. The company also recorded a $1.1 billion foreign-currency-exchange loss during the quarter.

Berkshire has for years struggled to find ways to deploy its mountain of cash in a sluggish deal environment, lamenting the lack of cheap opportunities. At the firm’s annual shareholder meeting in May, Buffett said he wasn’t in a rush to spend “unless we think we’re doing something that has very little risk and can make us a lot of money.” It now appears that not only was Buffett not in a rush to spend, but taking advantage of the AI bubble, he has been aggressively liquidating his biggest holding.

Finally, it’s not just AAPL that Buffett believes is overvalued and is aggressively dumping: the billionaire clearly believes the entire market is way expensive, and in the third quarter, Berkshire refused to repurchase any of its own shares, the first time it has done that since the company changed its buyback policy in 2018.

It’s hardly a surprise why:  as we noted in “Berkshire’s Growing Cash Pile Has A Hidden Message On Stocks” the Buffett Indicator has rarely signaled a more expensive market.

Bottom line: unlike October 2008, when Buffett led the clarion call to “Buy American”, this time he is selling American at a never before seen pace.

Are you?

One thing we know, Buffett is fearful.