Berkshire Hathaway Takes a Steps Back from Apple, Builds Cash Pile

Warren Buffett famously said he doesn’t invest in technology companies because he doesn’t invest in what he doesn’t understand. He doesn’t seem to get Apple anymore. Berkshire Hathaway slashed its stake in Apple by nearly 40% this past quarter, helping grow the Omaha company’s cash pile to more than $270 billion, a new record. 

The Big(ish) Apple

By the time Berkshire started buying Apple stock in 2016, the Cupertino company was releasing the iPhone 7 and its price-to-earnings ratio was in the low teens. But today, that P/E ratio stands at more than 33x, which could help explain Berkshire’s hefty withdrawal. But despite his romance with Apple, Buffett never really fell in love with Big Tech. 

Berkshire’s positions in tech are fairly limited, with less than 1% of its portfolio tied to Amazon. For Buffett, the thing about tech is that it’s so unpredictable, whereas people will always drink Coke (unless it’s New Coke):

• For the quarter ending on June 30, the value of Berkshire’s stake in Apple was $84.2 billion, down 38% from the $135.4 billion it reported at the end of March.
• Of its other largest holdings, Berkshire’s stakes in American Express, Bank of America, and Coca-Cola grew in the single digits, while its position in Chevron dropped by about 4% by the end of the second quarter. However, in recent weeks, Berkshire has sold off $3.8 billion worth of shares in BofA.

Canary in the Coal Mine: Berkshire dumped nearly $76 billion in stock this past quarter, but that doesn’t mean it’s lost its taste for cash flow. Interest rates are high, and that’s been beneficial to Berkshire’s portfolio of Treasury bills — which have earned $8 billion in interest income over the past year, outpacing the $5.4 billion the company received in dividends from its $285 billion stock portfolio, the Financial Times reported.