What news to have on a pleasant weekend.
Investors and reporters who have a knack for following Berkshire Hathaway’s latest stock holding would have been shocked or surprised at the Oracle of Omaha’s latest move.
Buffett sold almost 50% of his total Apple Inc. (NASDAQ: AAPL) holdings in the latest news.
And I thought one of his mantras was about holding on to a stock forever?
Our favourite holding period is forever
Buffett, 1988
So there are many arguments as to why, with two of the most likely answers being either a crash is coming, or Apple has lost its shine.
So, let’s take a look at Apple’s latest earnings before we jump to any conclusions.
Apple’s Q3’24 Results
Apple’s Q3’24 total net sales look to be good after starting off poorly. They are up 5% YoY, but the overall 9M’24 performance is just less than 1% above 9M’23. Product sales took a hit earlier in previous quarters.
The key culprit is China, which showed more weaknesses in the recent quarter.
For Q3’24, Greater China net sales lag behind Q3’23 by 7%, while for the comparable 9-month period, sales are down by 10%.
With more than 15% of its sales deriving from China, which used to be a key growing region, it is fair to assume this loss of momentum could justify Apple losing its shine.
To add fuel to the fire, Apple’s key product, the iPhone, has usually bucked any trend of slowdown. But revenue from iPhone sales looks to shrink for the second` consecutive year according to the latest estimates.
The latest macroeconomic development
The market is starting to show signs of bearishness. All major indices encountered selloffs, with the only thing in green being the VIX index.
A weaker-than-expected jobs report ignited worries of the dirty “R” word – recession.
This ties back to Apple’s dwindling iPhone sales, as customers are holding off on new phone purchases and upgrades.
In fact, global luxury powerhouse LVMH has seen its shares sold off, with sales in Asia excluding Japan, mainly contributed by China, falling 14%.
The weakening of the labour market is inherent. Coupled with the steep rise in July, the selloffs in the recent week were already in the making.
My take
Am I concerned about Buffett selling 50% of his original Apple stake? Not really.
Is Apple the only company fraught by slowing China sales? No.
Is China going to stop buying Apple and luxury goods forever? No.
The economy progresses in cycles. We just so happen to be at a stage where there could be an inherent recession, according to the experts.
Will Apple go bust if a recession were to materialize? Hardly possible.
Will people flock to Apple stores when times become better? History shows that they will.
The only time we might really know why Buffett sold 50% of his Apple stake is maybe at the next Berkshire annual general meeting. And that is almost one year down the road.
So it’s anyone’s guess for the time being.
I think it’s still best to focus on trusting our own judgement, reacting, and making decisions based on our individual profiles and risk appetites.
Apple’s main business is experiencing a temporary slowdown, based on the latest available resources. I wouldn’t be too hasty to follow suit just because the Oracle did so, with his real intentions unclear.
p.s. if you want to learn how to analyse and find the best stocks to buy, Alvin shares our strategy at this live webinar.
The reason of BRK reducing Apple stake is the same reason that they sold BYD and TSMC….geopolitics. All are very fine companies and leaders in their field. When it comes to geopolitics logic don’t apply to business case.
Perhaps you are right. But for me, China’s business for AAPL is just icing on the cake, albeit a big one.
In the most extreme event where AAPL no longer can sell phones in China, it would still do just fine. Most Magnificent 7 don’t have great presence in China.