1. Apple Inc. (NASDAQ:AAPL)
Stake Value as of Q2 2024: $84,248,000,000
Apple Inc. (NASDAQ:AAPL) has been a cornerstone of Warren Buffet’s portfolio for the last several years. However, Berkshire Hathaway’s recent filings revealed it had sold 389,368,450 Apple shares during the second quarter of 2024, representing nearly half of its stake in the iPhone maker.
Analysts believe that while there may be various potential reasons behind the sell-off, it is likely that Warren wanted to lock in gains at a lower tax rate, amid speculations of the capital gains being increased from 21% to 28%. Vltava Fund also believes the decision was influenced by taxation. Here is what the fund stated in its Q3 2024 investor letter:
You probably have not missed the news that Warren Buffett has already sold half the stock from his largest public markets investment, Apple Inc. (NASDAQ:AAPL). It was a phenomenal investment for Berkshire. Over the course of seven years or so, it brought a profit of well over USD 100 billion. Apple comprised a very large position within Berkshire’s public portfolio, and this was the reason we avoided Apple stock outright during that time. We considered our exposure to Apple through our holdings of Berkshire stock to be sufficient, and we ended up making a lot of money on it. There has been a great deal of speculation in the market about what Buffett’s sale of Apple signals regarding his view of the stock market. I think the reason for the sale is much simpler. Buffett probably considers Apple stock so expensive that he prefers to cash in at 20% less (after all, Berkshire must pay tax on its profits). He started selling in the first quarter of the year. When I was in Omaha for the general meeting in May, Buffett said he was still selling, and I expect he continued to do so in the third quarter. I have to say that, as a Berkshire shareholder, I am happy about the Apple sale. I think Berkshire’s management will find a better use for this money, as they always have in the past. It is quite likely that they already have a very specific idea about this. If that takes two or three years, it does not matter at all. This is not a race and, in the meantime, the risk of holding Berkshire Hathaway stock itself has been greatly reduced.
Despite the downsizing, Apple remains the top pick in the Buffet stock portfolio, with a holding value of over $84 billion, accounting for 30.09% of the portfolio. Moreover, according to Insider Monkey’s database, 184 hedge funds have investments in Apple Inc. (NASDAQ:AAPL) as of Q2 2024, making it one of the best stocks to buy now.
The recently concluded third quarter of FY24 was one of the best quarters for Apple in a long while, during which it reported a June quarter record revenue of $85.8 billion, representing a 5% year-over-year increase. Revenue from products grew 2% from last year, driven by the launch of iPad Pro and iPad Air, to reach $61.8 billion. Services revenue also reached an all-time high of $24.2 billion, registering a 14% spike from last year. Gross margin stood at 46.3%, which was within the higher range of the guidance. EPS was recorded at $1.40, beating analysts expectations of $1.35 per share.
The Cupertino-based tech giant reported $39.3 billion from iPhone sales in Q3, which accounted for nearly half of Apple’s overall revenue for the quarter. The figure was down 1% year-over-year and is attributed to the 6.5% drop in sales in China, where the company faces fierce competition from local manufacturers like Huawei. While the dip in iPhone revenue has caused some investor concern, most remain bullish on the stock after the incorporation of artificial intelligence in the new iPhone 16.
There is consensus among Wall Street analysts on the stock’s Buy rating with a share price upside potential of 8.58%.
Overall, AAPL ranks first among the Buffett Stock Portfolio: Top 10 Stock Picks for 2024. While we acknowledge the potential of technology companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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