Warren Buffet's substantial selling activity during the September-end quarter, totaling $36 billion, primarily involved three specific stocks, making up almost ninety percent of the overall amount.
Warren Buffet's substantial selling activity during the September-end quarter, totaling $36 billion, primarily involved three specific stocks, making up almost ninety percent of the overall amount.
Wall Street's most esteemed figure in the finance world is none other than Berkshire Hathaway's CEO, Warren Buffett. Serving as the company's leader for nearly six decades now, Buffett, affectionately known as the "Oracle of Omaha," has boosted Berkshire's Class A shares (BRK.A) by an astounding 5,676,000% overall, as of Nov. 6 closing time.
Despite Buffett's imperfections, his uncanny ability to identify lucrative opportunities overlooked by many investors has garnered him a huge following. Numerous investors attempt to mimic his strategies, track his moves.
The opportunity to mimic Buffett's strategies is made possible due to the mandatory public filings, such as Form 13F, that disclose the stocks purchased and sold by him and his top investment advisors, Ted Weschler and Todd Combs. These documents are submitted to the Securities and Exchange Commission (SEC) and made available 45 days after the close of a quarter, with Berkshire's 13F being expected on Nov. 14, which will reveal the stocks Buffett acquired and disposed of in the previous quarter.
However, you don't have to wait until Nov. 14 to learn about some of Buffett's most significant third-quarter trades. Due to Form 4 filings, foreign corporate filings, and Berkshire's financial report, we can pinpoint the stocks responsible for the majority of Buffett's recent selling spree.
Over the past two years, Buffett has been a net seller of stocks
While Form 13F filings can be helpful in identifying which stocks Berkshire invests in, the company's cash flow statement is vital in illustrating Buffett and his team's intentions.
In every quarter since Oct. 1, 2022, Buffett has been selling more stocks than buying, based on Berkshire's consolidated cash flow statements. This net sales figure breaks down as follows:
- Q4 2022: $14.64 billion in net equity sales
- Q1 2023: $10.41 billion
- Q2 2023: $7.981 billion
- Q3 2023: $5.253 billion
- Q4 2023: $0.525 billion
- Q1 2024: $17.281 billion
- Q2 2024: $75.536 billion
- Q3 2024: $34.592 billion
Over the past two years, Buffett has sold $166.2 billion more in stocks than he has bought; this selling activity has significantly escalated in 2024.
According to Berkshire's quarterly cash flow statement, approximately $36 billion in equity securities were sold in the third quarter. By delving deeper, we find that about 90% of this roughly $36 billion in selling can be traced to three stocks.
Apple: $22.5 billion (estimated)
Though Berkshire Hathaway has not yet disclosed its Q3 13F, its latest financial report revealed a significant reduction in the company's largest investment holding, tech giant Apple (AAPL 1.88%).
Berkshire's quarterly reports always provide the fair values of the five largest investments in equity securities, which are based on the share price of each respective company as of the end of the quarter (in this instance, September 30). The $69.9 billion fair value listed for Apple equates to roughly 300 million shares, a decrease of 100 million shares from its June-end holdings.
Since Berkshire Hathaway isn't a 10% beneficial owner in Apple, it's not required to file a Form 4, meaning we don't have a clear timeframe or average selling price for the disposal of 100 million Apple shares during the third quarter. However, given that Apple's top holding stayed within a narrow range around $225 per share throughout the quarter, I believe that around $22.5 billion of the nearly $36 billion in net selling activity came from Apple.
Those wondering why Buffett would divest shares in his top position might point to his belief during Berkshire's annual shareholder meeting in May that the corporate tax rate would eventually rise. Therefore, locking in substantial unrealized gains at an advantageously low tax rate would be favorably perceived by investors.
Bank of America: $9.61 billion
SEC filings indicate that Buffett has been persistently selling shares of Berkshire's former No. 2 holding and now No. 3 by market value, Bank of America (BAC 1.82%).
At the close of the June quarter, Berkshire held over 1.03 billion shares of this financial giant, exceeding the 10% threshold that necessitates Form 4 filings after buying or selling activities. This means that Buffett and his team's buying or selling activities must be reported within two business days.
During the third quarter, 13 distinct Form 4 submissions indicate that Buffett managed the disposal of approximately 235.17 million shares of BofA, accumulating to an impressive $9,609,825,813. The Form 4 filings provide data on the average price of each sale, enabling us to determine the exact amount of profits Buffett's company is reaping from these sales.
The motives for this selling spree might be analogous to Buffett's hints during Berkshire's annual shareholder meeting. Berkshire has amassed substantial unrealized profits from its Bank of America investment, and cashing in on a portion of these gains with the corporate tax rate reaching an all-time low could be seen as a strategic decision.
However, this selling activity might also reflect Buffett's discontentment with the historically expensive stock market and his resolve to shift a significant portion of Berkshire's investment portfolio into cash.
BYD: $44.3 million
Another stock that Buffett is selling, which isn't detailed in Berkshire's quarterly 13F filings, is China-based electric-vehicle (EV) manufacturer BYD (BYDD.F 0.91%).
A Form 2 submitted to the Securities and Futures Commission of Hong Kong (commonly known as a "corporate substantial shareholder notice") on July 16 reveals that 1,395,500 shares of BYD were sold at an average price of 246.96 Hong Kong dollars, equating to $31.76 USD per share. This translates to a profit of $44,321,080 for Buffett's company.
While Buffett's substantial selling of Apple and Bank of America could be attributed to a mix of corporate taxes and an expensive stock market, this slight reduction in BYD appears to be solely aimed at reducing Berkshire's stake in the company below the 5% threshold that necessitates Form 2 filings. After this sale, Berkshire's stake in BYD decreased from 5.06% to 4.94%.
In terms of operational performance, BYD has provided no incentive for Berkshire's investment team to slacken their pace. BYD's third-quarter profits increased significantly, surpassing the sales volume of North American EV giant Tesla.
After analyzing Berkshire Hathaway's recent financial reports and Form 13F filings, it's evident that Warren Buffett has been actively involved in managing the company's investments, including significant sales of stocks like Apple, Bank of America, and BYD. This strategy of selling stocks has generated substantial profits for Berkshire Hathaway, totaling over $166 billion in net sales over the past two years.
Investors interested in following Buffett's footsteps can closely monitor these public filings and financial reports to gain insights into his investment strategies. By doing so, they may be able to identify potential investment opportunities themselves, leveraging the wisdom of one of the world's most successful investors.