Warren Buffett on Berkshire Hathaway’s Apple Shares: A Strategic Move or a Shift in Philosophy?
This morning, Berkshire Hathaway's latest 10-Q filing revealed a significant move: the sale of 115 million shares of Apple in the last quarter. As Apple remains the largest holding in Berkshire Hathaway’s portfolio, this decision has raised questions among shareholders, particularly about Warren Buffett's current views on Apple and the rationale behind this sale.
Shareholder Concerns: Has Buffett's View on Apple Changed?
One such shareholder, Sherman Lamb, a 27-year-old Berkshire Hathaway Class B shareholder from Malaysia, voiced his concerns. He noted that in the previous year's annual meeting, Buffett praised Coca-Cola and American Express as Berkshire’s long-duration partial ownership positions but did not include Apple in this group in the most recent shareholder letter. This led to Sherman’s pressing question: Has Buffett’s or his investment managers’ view on the economics or attractiveness of Apple's business shifted since Berkshire first invested in 2016?
Buffett's Response: Apple Is Still a Core Holding
Buffett was quick to address these concerns. While acknowledging the sale of some Apple shares, he reassured shareholders that Apple is expected to remain Berkshire’s largest common stock holding by the end of the year. Buffett emphasized that Berkshire Hathaway views its investments in companies like Coca-Cola, American Express, and Apple not just as stock market plays but as ownership in high-quality businesses. This long-term perspective is a cornerstone of Buffett’s investment strategy, focusing on the intrinsic value of these companies rather than reacting to short-term market fluctuations.
The Influence of Benjamin Graham on Buffett's Investment Philosophy
Buffett’s approach is deeply rooted in the teachings of Benjamin Graham, particularly the principles laid out in Graham’s seminal book, "The Intelligent Investor." Buffett credits this book with fundamentally changing his perspective on investing, teaching him to view stocks as ownership in businesses and to treat the market as a tool that serves the investor rather than one that instructs them. This philosophy has guided Buffett throughout his career and continues to shape Berkshire Hathaway’s investment decisions.
Long-Term Commitment to Core Investments
Buffett made it clear that, barring any extraordinary events, Berkshire Hathaway intends to maintain significant stakes in Apple, American Express, and Coca-Cola. He sees these companies as exceptional businesses that align with Berkshire’s long-term investment strategy. Despite selling a portion of Apple shares, the decision was made with the understanding that Apple remains a core part of Berkshire’s portfolio and is likely to continue being so in the foreseeable future.
Buffett on Taxes: Berkshire's Willingness to Pay Its Fair Share
Buffett also touched on the subject of taxes, noting that while many investors focus on minimizing tax payments, Berkshire does not shy away from paying its fair share. He highlighted that Berkshire is currently paying a 21% federal tax rate on the gains from selling Apple shares, a rate that could increase in the future given current fiscal policies. Buffett expressed his belief that higher taxes are likely and that Berkshire is prepared to pay them, reflecting a commitment to both responsible investing and corporate citizenship.
Conclusion: The Simplicity of Buffett's Approach
In closing, Buffett reaffirmed his belief in a simple yet effective investment approach. By focusing on high-quality businesses and maintaining a long-term perspective, Berkshire Hathaway has been able to navigate various market conditions and fiscal policies successfully. The sale of Apple shares, while noteworthy, should be seen in the context of a broader strategy that remains deeply committed to companies like Apple, American Express, and Coca-Cola. As Buffett has demonstrated time and again, the key to investment success lies not in predicting markets but in choosing the right businesses and sticking with them.
