• (0:30) – Should you follow Warren Buffett’s investment trends?

• (3:45) – Analysis of recent changes in Berkshire Hathaway’s stock positions

• (29:05) – Episode Summary: AAPL, BAC, BRK.B

• [email protected]

Welcome to episode #378 of the Value Investor Podcast.

Every week, Tracey Ryniec, editor of Zacks Value investor portfolioshares some of her best value investing tips and stock recommendations.

There was big news for value investors last week. Berkshire Hathaway (BRK.B) reported its second quarter results and announced that it had sold a large portion of its Apple (AAPL) stocks during the quarter.

Warren Buffett had already announced at the annual general meeting that he had made sales worth 20 billion dollars in the first quarter.

But along with newly announced second-quarter revenue, Berkshire Hathaway has now sold 50% of its massive Apple stock position, shocking longtime Berkshire fans.

The money has apparently been converted into cash, as Berkshire’s cash reserves now total $277 billion, up from about $180 billion in the first quarter.

In addition, SEC filings have shown that Berkshire has sold over $3.8 billion in Bank of America (BAC) shares in the third quarter. Buffett hasn’t sold Bank of America shares in years.

When do you sell? Never.

One of Buffett’s popular investment tips is the phrase, “The best time to sell is never.” Some people take this to mean that you should never sell a stock.

But over the years, of course, he has sold some of his stock positions. And then some. When the pandemic hit, Buffett ordered his deputies who owned several airline stocks to sell them all, even if it meant taking a loss.

He also sold a large position in IBM, also at a loss. And recently, Berkshire Hathaway sold its position in RH.

What lessons can be learned from Buffett’s sales?

1. Rebalancing

Buffett called Apple one of the four pillars of Berkshire Hathaway’s business. He bought the stock in 2016 and sold it over the years when the position became too large for the portfolio. This “rebalancing” is typical in most portfolios, especially when you have a big winner like Apple.

2. Invest to make money

Apple was one of Buffett’s biggest trades. I’m sure you’ve made big trades like that too. But that doesn’t mean you shouldn’t pocket some of your profits. Remember, investors don’t have to sell their entire position. It’s OK to take some profits but let the stock continue to rise.

The story continues

3. Has the stock become too expensive?

Valuations could be a problem. Apple was cheap when Buffett bought it in 2016, trading at less than 10 times forward earnings. Now it trades at 32 times, and single-digit earnings growth is expected for fiscal 2024. Are any of your stocks currently trading at astronomical valuations? Then it may be time to re-evaluate.

4. Changes in the company

As the decades go by, things change. Companies and management change. Is the company still in the industry you want it to be in? Netflix used to send DVDs in red envelopes through the mail. Today, it’s exclusively a streaming service.

5. Know your investment goals

Warren Buffett manages the Berkshire Hathaway portfolio for Berkshire shareholders. For reasons still unknown, he believes it is better for him to have cash than to hold larger positions in Apple and Bank of America. Your investment goals will be different. It is OK to sell a stock when you have reached your goal.

What else should you know about Buffett’s stock sales in 2024?

Tune in to this week’s podcast to find out.

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Bank of America Corporation (BAC): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report

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