There have been several occasions over the years when legendary investor Warren Buffett has bought or sold a stock that I also had in my portfolio. While I don’t blindly follow everything he does, any change from such a savvy investor makes me rethink why I own the particular stock. So when I saw over the weekend that he had sold a good chunk Apple (NASDAQ:AAPL) stock, I began to wonder if I should do the same.
Reducing its use
According to documents published on Saturday (August 3), Buffett sold around 390 million Apple shares, which was about half of his stake in the technology giant. This was done via Berkshire-Hathawaythe company in which he houses his large investment portfolio.
The documents don’t tell us what Buffett said directly about his decision, so I have to try to read between the lines.
Apple was by far the largest holding in his portfolio. At the end of the first quarter, it represented 40.8% of his portfolio. In the past, I found it a little odd why Apple was such a large holding overall. After all, the company is not particularly diversified. Had the stock underperformed, it could have ruined the entire year.
By reducing his stake in Apple, Buffett is creating a more balanced portfolio. The monetary value of his stake means it is still the largest holding, but it represents a much smaller percentage of the overall investment pot.
Put a profit in the bank
Another notable point is that he reduced his position but did not sell it completely. If Buffett was really worried about Apple stock crashing, he would have sold everything. So the fact that he kept a large portion makes it look like he is simply pocketing some profit.
He started buying Apple shares in 2016. Since then, the price has risen significantly. In the last year alone, it has risen by 15%. Therefore, it is logical and sensible to reduce the risk of a price decline by selling some of it now.
As for the rest, I can see Buffett sticking with it for the long term. After all, Apple continues to make progress as a company. In particular, the company is increasingly focusing on generative artificial intelligence (AI). This was a focus area on the last quarterly earnings call.
Financially, revenue increased 5% last quarter compared to the same period last year. Earnings per share increased 11%. With new product launches (like the iPhone 16) expected in the next few months, demand looks good going forward.
This time he does not follow Buffett
One reason I might copy Buffett is the risk of a short-term correction in Apple shares. US technology stocks are currently under pressure as investors fear the US could enter a recession later this year. Growth stocks are usually considered risky in this environment.
As things stand, I will keep my Apple shares. I am confident that the company will continue to grow and make great strides in the field of AI.
The post “Warren Buffett sells half his Apple shares. Should I do the same?” appeared first on The Motley Fool UK.
Further reading
Jon Smith owns shares in Apple. The Motley Fool UK has recommended Apple. The views expressed on companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2024
