Buffett's love affair with Apple is not over but paring his position may be a mistake anyway
There’s no question Warren Buffett has a love affair with Apple (NASDAQ:AAPL). The billionaire investor built up a position in the tech giant that allowed AAPL stock to account for almost half of Berkshire Hathaway‘s (NYSE:BRK-A)(NYSE:BRK-B) portfolio value.
And then Buffett did this. He sold about 10 million shares worth some $2 billion last quarter. It took Apple from over 48% of the portfolio to 44%. That’s still a massive position for Warren Buffett stocks, so I don’t think he is abandoning the tech company, but it does represent a significant paring. Yet why did he do it?
Finding a worm in Apple?
It’s not the first time Buffett has sold off Apple shares. He has sold off the stock several times over the past five years. After acquiring shares in 2016, the investing great sold off some stock in the fourth quarter of 2018. He did it again in the fourth quarter of 2019 and the third and fourth quarters of 2020 when he sold over 93 million shares worth $11 billion.
For the next three years, he left his position at Apple virtually untouched. The most recent sale, however, is notable if only because Buffett himself previously said his decision to cut his stake was “probably a mistake.” The late Charlie Munger agreed Buffett erred by selling.
Yet those sales were done mainly for tax purposes, and that’s likely why he sold again. That is why the sales occur late in the year. But Buffett may have made a mistake again as Apple shares will certainly rise again. Fortunately, he can make up for the error if he repurchases the stock as he has done after selling. AAPL stock is down 5% in 2024, so he could buy them at a discount depending on when he sells.
While the headline news was Buffett sold Apple stock, he is two companies he bought last quarter.
Sirius XM Holdings (SIRI)
Buffett didn’t buy any new stocks last quarter but increased his position in Sirius XM Holdings (NASDAQ:SIRI). The satellite radio operator was a new stock Buffett had just bought in the third quarter, so he was building up his position. The investing giant now owns 40 million shares valued at almost $189 million. It’s not a very large stake, though. It amounts to just 0.1% of Berkshire Hathaway’s total and only 1% of Sirius’ outstanding shares.
The purchase shows a commitment to the company and its ability to generate free cash flow (FCF). The satellite radio operator generated $1.2 billion for the full year, but that was less than the $1.5 billion it previously forecasted.
Sirius XM has a monopoly on satellite radio broadcasts. No other company is licensed to do so. Yet because listeners can choose Spotify (NYSE:SPOT), Pandora (which Sirius owns), or even Apple’s iTunes to get their music and podcasts, its monopoly status is a very shallow moat.
Still, SIRI stock trades in the $6 to $7 per share range. That suggests its current price, around $4.45 per share, makes it undervalued. With a nominal dividend yielding 2.1% annually, there seems to be some argument for adding the stock to a portfolio.
Chevron (CVX)
Integrated oil and gas giant Chevron (NYSE:CVX) is another stock Buffett added last quarter. He purchased $16 million worth of shares in the period, bringing his holdings’ worth up to about $19 billion. The transaction is almost as notable as the sale of Apple stock because, until the fourth quarter, Buffett had been slowly cutting his stake in the energy company.
The billionaire’s preferred oil stock was Occidental Petroleum (NYSE:OXY), the only other stock Buffett bought. He has been amassing a large position in the business, which now totals 28% of outstanding shares (Buffett has SEC permission to buy half the firm). But now he’s back to buying Chevron.
That could be because Chevron wants to acquire industry peer Hess (NYSE:HES) for its Guyana assets. However, Exxon Mobil (NYSE:XOM) just threw a wrench into the works. The energy stock says it has the right of first refusal to those assets along with Chinese oil giant CNOOC. Chevron noted in its annual filing it is in negotiations with the two but disputes the rights apply to a merger.
Even with the long-term outlook for fossil fuels still bright, reupping his stake in Chevron was a smart decision.
On the date of publication, Rich Duprey held a LONG position in CVX and XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.
