We typically get insights into the stock trades made by Berkshire Hathaway‘s iconic investor, Warren Buffett, from the company’s 13-F filings with the SEC. While we await the first-quarter 2023 filing due on May 15, revelations from Berkshire’s annual meeting gave us a peek into two significant stock sales that led to the conglomerate’s cash reserves swelling to a record high of nearly $189 billion.
These divestments, each motivated by distinctive reasons, had contrasting impacts on Berkshire’s vast stock portfolio. Here’s an analysis of the two transactions and the rationale behind Berkshire’s decisions.
Warren Buffett’s Humbling Acknowledgment
During Berkshire’s Q&A session at the annual meeting, Buffett disclosed the complete sale of Berkshire’s holdings in Paramount ((NASDAQ: PARA)). While the exact selling price remains undisclosed, Berkshire possessed 63.3 million Paramount shares by the end of 2023. Unfortunately, since Berkshire’s initial investment in Paramount in early 2022, the stock price plummeted by 57%.
Buffett admitted that the decision to sell Paramount was entirely his, as Paramount faced challenges such as a dividend cut, CEO departure, and disillusioning investor performance, especially due to the struggle of streaming services like Paramount+ to turn a profit, alongside dwindling subscribers in traditional TV services.
Embodying Buffett’s wisdom, he emphasized, “The most important course of action if you find yourself in a hole is to stop digging.” The Paramount debacle exemplifies this sagacious principle.
Buffett’s Adoration for a Famed Tech Stock
The second prominent sale was that of Apple ((NASDAQ: AAPL)), significantly more extensive than the Paramount move. While Berkshire sold roughly 13% of its Apple stake (about 116 million shares) during the quarter, it was done at a remarkable profit.
Though the exact selling price remains unknown, the transaction could have generated close to $20 billion for Berkshire, given the price of Apple shares at the quarter’s end. Buffett clarified at the meeting that Apple remained one of his favored enterprises, hinting that the sale was mainly driven by tax considerations amid concerns about potential future tax rate hikes.
Buffett lauded Apple as a top-tier investment, comparing it favorably to longstanding Berkshire favorites like American Express ((NYSE: AXP)) and Coca-Cola ((NYSE: KO)). He even suggested that Apple could rank higher than the aforementioned stalwarts, even post his stewardship.
Strategic Portfolio Shifts on the Horizon
Buffett’s inclinations have led Berkshire to be a net seller of stocks in recent quarters, forsaking sectors such as airlines and most banks due to unattractive valuations. These recent divestitures further underscore this trend in the first quarter.
It’s crucial to note that these two sales are not the sole transactions Berkshire engaged in during the quarter. While Berkshire reported net stock sales in the first quarter earnings release, potential buying activities within the portfolio might surface with the awaited 13-F filing later this month.
Contemplating Investment Prospects in Berkshire Hathaway
Before considering an investment in Berkshire Hathaway, deliberating upon the following information is prudent:
The Motley Fool Stock Advisor recently identified the 10 best stocks for future investments; interestingly, Berkshire Hathaway did not make the cut. Findings suggest these selected stocks have the potential for substantial returns in the forthcoming years.
Reflecting on past successes, envision the winning outcomes from following advisories like Stock Advisor. Back in April 2005, when Nvidia was spotlighted in a similar list, a $1,000 investment then would have yielded a staggering $544,015 today!
