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Headlines
- Berkshire Hathaway has significantly reduced its holdings in Apple and other stocks in the latest quarter.
- The company’s share repurchases have dramatically slowed, indicating a potential shift in Buffett's approach.
- Berkshire’s current stock price is notably high compared to recent buyback prices, raising questions about future buyback decisions.
Berkshire Hathaway's portfolio at the end of the second quarter reveals some notable changes, including a major reduction in its Apple investment. The conglomerate's quarterly update showed a substantial decrease in its Apple holdings, with nearly half of the previously held stake being sold.
In addition to Apple (NASDAQ:AAPL), Berkshire has also divested from several other stocks. The firm completely exited its position in Snowflake, a software company, and trimmed its investment in Capital One Financial by about 25%.
Another significant development during this period is Berkshire's reduced share repurchase activity. In the first quarter of 2024, the company allocated approximately $2.6 billion to share buybacks. This figure dropped dramatically to just $0.3 billion in the second quarter, marking a notable slowdown in buyback activity.
Berkshire Hathaway’s buyback strategy is subject to two primary conditions. Firstly, the company must maintain a minimum of $30 billion in cash and short-term investments after repurchases. With $277 billion in its balance sheet, this condition has not yet posed a problem. Secondly, Warren Buffett must assess that Berkshire's shares are priced below their intrinsic value based on a conservative evaluation. Historically, this assessment required the agreement of both Buffett and Charlie Munger, who passed away last year.
The decrease in buybacks, especially in June when no repurchases occurred, suggests that Buffett may have found the stock price to be less attractive compared to previous periods. During June, Berkshire’s stock price was lower than the average price paid for buybacks in May and February, which was a notably active period for repurchases.
Currently, Berkshire Hathaway's stock trades around $444 per share, a level higher than any price previously seen during its buyback history. This elevated trading price means that whether Buffett views the current stock price as favorable will become clearer with the third quarter's buyback activity, or lack thereof.
