Speculations about Warren Buffett's Apple Sales

Just a few years ago, Apple held one of the most prominent positions in Warren Buffett's investment company, Berkshire Hathaway's, portfolio. Despite Apple still accounting for the largest share of Berkshire, the company has continuously sold shares over the past few quarters and now holds less than half of its original position. This raises the question among investors as to how long Apple will maintain this prominent status. At first glance, the decision to sell appears unusual, but a deeper analysis shows that Buffett's move is strategically sound. Apple, previously valued at 12 times its earnings, is now traded at 35 times its earnings—a significantly higher price amidst stagnant company growth. There are several reasons for this sell-off. Buffett certainly doesn't need to urgently raise liquidity, as Berkshire Hathaway holds nearly 277 billion dollars in cash and short-term investments. Instead, the primary motivation likely lies in the prospect of an increase in the capital gains tax rate from 21% to 28%. Consequently, Buffett aims to realize gains at a lower tax rate. Nevertheless, Buffett emphasized at the 2024 shareholders' meeting that Apple remains the largest position in the portfolio despite the sales and that Berkshire firmly believes in the company. But could there be other reasons for the sale? If Buffett were to openly acknowledge that Apple's valuation is now too high, the stock price would likely plummet, making further divestment difficult. These are hypotheses that do not necessarily reflect Buffett's motivations. Wall Street analysts predict only market-aligned growth for Apple. Should a company that barely grows beyond the market be traded at a 50% premium to the S&P 500? Certainly not. In summary, Apple currently represents neither a growth stock nor a classic value stock. Considering the numerous other more attractive investment options, it seems prudent to realize gains and seek alternatives.