Buffett explains Berkshire's reduced stake in Apple at annual company meeting

Warren Buffett, the billionaire co-founder and CEO of Berkshire Hathaway, offered some insights Saturday at the company's annual meeting into the decision to reduce its stake in tech giant Apple, which was and remains its largest stock holding.

Berkshire's stake in Apple fell by 22% to $135.4 billion as of March 31 from $174.3 billion at the end of 2023, even as the iPhone maker's share price fell just 11%. The conglomerate appears to have sold about 115 million shares, or 13% of its holdings in the quarter.

The sale resulted in Berkshire realizing an $11.2 billion after-tax gain in the quarter from its sale of Apple stock and contributed to the rise in the company's cash holdings to a record of $189 billion. Despite Berkshire reducing its holdings in Apple, Buffett said he expects it to remain the company's largest stock investment.

"We have sold shares and I would say that at the end of the year I would think it extremely likely that Apple is the largest common stock holding we have," Buffett said. He went on to explain how he and his late business partner, Charlie Munger, viewed their stock investments in companies like Apple.

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"One interesting thing is that Charlie and I looked at common stocks or marketable equities or the things that people love to look at as being businesses, and so when we own a Dairy Queen, or we own whatever it may be, we look at it as a business. When we own Coca-Cola or American Express or Apple, we look at that as a business," Buffett explained. 

"Now, we can buy really wonderful companies in the market as businesses — we can't buy all of their shares, we can't buy 90% or 80% or anything like that," he added.

Buffett went on to say those companies and Apple are "wonderful" businesses and that Berkshire's assessment of those firms is such that they'll remain major holdings unless something dramatic occurs.

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"We will own — unless something really extraordinary happens — we will own Apple and American Express and Coca-Cola when Greg takes over this place," Buffett said.

Later in the question-and-answer session, Buffett cited Apple CEO Tim Cook's leadership as a reason for his confidence in the tech giant and said he has been a great successor to the late Steve Jobs.

Buffett also touched on the tax consequences of selling Apple stock at this time when the capital gains tax rate is lower than it has been historically and said that it may be higher again in the future as the government looks to narrow the budget deficit. He also said that given alternatives in the market and uncertainty around the world, holding a larger cash stake is preferable.

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"I don't mind at all under current conditions building the cash position. I think when I look at the alternative of what's available in the equity markets and I look at the composition of what's going on in the world, we find it quite attractive," Buffett said.

"Almost everybody I know pays a lot more attention to not paying taxes than I think they should. We don't mind paying taxes at Berkshire, and we are paying a 21% federal rate on the gains we're taking in Apple and that rate was 35% not too long ago, and it's been 52% in the past when I've been operating," Buffett said.

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"It doesn't bother me in the least to write that check and I would really hope that with all that America has done for all of you, it shouldn't bother you that we do it and if I'm doing it at 21%, and we're doing it at a lot higher percentage later on, I don't think you'll actually mind that we sold a little Apple this year," he explained.

Reuters contributed to this report.