Warren Buffett is one of the most successful investors of all time. He boasts a track record dating back nearly 70 years in which he has produced eye-popping returns for those willing to stick with him over the long run. If you'd bought shares of Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) in 1965, when Buffett took control of the company, you'd have earned a cumulative return of 4,384,748% through the end of last year. By comparison, the S&P 500's cumulative return over that time was just 31,223%.
Buffett has overseen the growth of Berkshire's investable assets, reaching well over $600 billion today. But Buffett hasn't seen a lot to like in the stock market recently. In fact, he's made some big sales of two of Berkshire's largest stock holdings in recent quarters, Apple(NASDAQ: AAPL) and Bank of America(NYSE: BAC). At the same time, he's piled most of the money from those stock sales and Berkshire's ongoing operating income into one high-yield investment.
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Here's what investors need to know.
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$133 billion of sales in 2024 (so far)
Buffett (through Berkshire) sold off $133 billion worth of stock through the first nine months of 2024.
The bulk of that was Apple stock. Berkshire held 905.6 million shares of Apple at the start of the year. The stock made up nearly half of the entire equity portfolio Buffett and his team managed. But Buffett has significantly cut down on that position so far this year.
He sold 116 million shares in the first quarter, 389 million shares in the second quarter, and 100 million shares in the third quarter. The entire stake stands at 300 million shares today. That said, those shares are worth about $70 billion, as of this writing, accounting for over 23% of Berkshire's entire equity portfolio. That means Apple is still Berkshire's largest equity position. Buffett said it's extremely likely Apple will be the largest common stock holding in Berkshire's portfolio at the end of the year during Berkshire's shareholder meeting in May.
There's a chance Buffett will continue selling off Berkshire's stake in Apple during the fourth quarter, though. Shares hit a new all-time high in October, and continue to trade around that level as of this writing.
Buffett has also turned his attention to Berkshire's stake in Bank of America recently. Between July and October, Berkshire sold at least $10.5 billion worth of shares in the bank stock. Berkshire's stake in the company fell below 10% as a result of the sales, so investors will have to wait until Berkshire's next earnings report and 13F filing to see if Buffett continued to trim the position. Considering the stock currently trades at a price higher than every previous sale from Berkshire, there's a good chance Buffett continued selling.
Price isn't the only factor influencing Buffett's decision to sell though. He pointed out that there's a high likelihood the corporate tax rate will revert to a less favorable level after the current tax laws expire at the end of 2025. If Congress doesn't extend the tax cuts, the rate will climb from 21% to 35%. That said, a Republican White House and Republican-controlled Congress are likely to extend the current tax rate.
There are no guarantees about the future, though, and Buffett has taken the opportunity to lock in the 21% tax rate on over $97 billion worth of capital gains so far this year. However, it's worth pointing out that Buffett hasn't sold every position in the portfolio with substantial long-term capital gains. The portfolio still contains $193.5 billion worth of unrealized gains. In other words, his recent sales suggest he sees Apple and Bank of America as priced relatively high compared to their intrinsic values, at least more so than other large holdings in Berkshire's portfolio.
The massive investment Buffett can't stop buying
While Buffett has sold tens of billions worth of stock in 2024, he hasn't bought many new equity investments. Total equity purchases totaled just $5.8 billion through the first three quarters. He's also not repurchasing as much Berkshire stock as he has in the recent past. Total share repurchases came to $2.9 billion this year. And private investments are limited to the remaining 20% stake in Pilot, which cost $2.6 billion.
That leaves a massive pile of cash for Buffett to find a good investment.
And right now the best use he sees for that cash is to pile it into short-term Treasury bills. Buffett has favored government bonds for decades, noting in each quarterly earnings report, "We continue to believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments."
In 2024, Buffett has grown his investment in Treasury bills by $157.2 billion.
The good news for Buffett and Berkshire Hathaway shareholders is that he doesn't have to choose between safety and yield right now. Treasury bills maturing between one and six months offer yields between 4.5% and 4.65%. That's still higher than the 10-year Treasury yield as of this writing.
Buffett is more than happy to collect that interest while he waits for an appropriate investment opportunity. But he said he'd still be putting a lot of money in Treasury bills even if they didn't offer such an attractive yield. The truth is he doesn't think there's currently a more effective use for the money.
That may sound like Buffett is extremely bearish on the stock market. But he notes there are only so many investment options available that can move the needle for a company as large as Berkshire Hathaway. As mentioned, it has over $600 billion of investable assets. That limits potential investments that could become a significant portion of Berkshire's portfolio (the way Apple and BofA were) to just a handful of the largest companies in the world.
But Buffett's comments at Berkshire's shareholder meeting in May suggest he thinks there are still plenty of opportunities in the stock market for smaller investors. He told shareholders, "$10 million I think Charlie or I could earn high returns on." That's an amount that only a tiny percentage of individual investors are managing. For the most part, the entire universe of stocks is available to everyday investors.
While Buffett is selling large-cap stocks like Apple and Bank of America and buying Treasury bills with the proceeds, that doesn't mean individual investors should follow his exact footsteps.
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Bank of America is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
