Berkshire pares huge Apple stake as cash, operating profit set records

TDT | Agencies    

The Daily Tribune – www.newsofbahrain.com

Berkshire Hathaway significantly reduced its enormous stake in Apple in the first quarter, as Warren Buffett’s conglomerate let its cash hoard swell to a record $189 billion.

Buffett’s company also posted a record operating profit exceeding $11bn, as its insurance operations benefited from improved underwriting and higher income from investments as interest rates rose.

The value of Berkshire’s stake in Apple fell 22% to $135.4bn as of March 31 from $174.3bn at the end of 2023, even though the iPhone maker’s share price fell just 11% in the quarter.

Based on changes in Apple’s stock price, Berkshire appears to have sold about 115 million shares, or 13% of its holdings, in the quarter, ending with about 790 m.

A large sale is an about-face for Buffett, who is normally tech-phobic but came to view Apple as a consumer goods company with strong pricing power and devoted customers.

Some investors, however, have expressed concern that Apple consumed too much of Berkshire’s investment portfolio.

But the sales leave Buffett with more than six times the minimum $30bn cash cushion he has pledged to keep.

At Berkshire’s annual meeting on Saturday, Buffett assured shareholders that “unless something dramatic happens that really changes capital allocation, we will have Apple as our largest investment.”

He also said “I don’t mind” expanding the cash stake, in light of alternatives in the equity markets and conflicts around the world, and said cash could top $200bn by the end of June. The Apple sales resulted in Berkshire’s realizing $11.2bn of after-tax gains in the quarter from selling investments.

Buffett maintained that he doesn’t mind paying taxes.

PROFIT SWELLS First-quarter operating profit rose 39% to $11.22bn, or about $7,807 per Class A share, from $8.07bn a year earlier.

“Berkshire continues to benefit from attractive yields on short-term investments and large cash balances,” Edward Jones analyst James Shanahan said in a research note.

Net income fell 64% to $12.7bn, or $8,838 per share, from $35.5bn a year earlier, when Berkshire had large unrealized gains from its stocks.

An accounting rule requires Berkshire to report those gains with its financial results. Buffett urges investors to ignore the resulting volatility.