Berkshire Hathaway trims Apple stake amid record operating profits

Berkshire unloads Apple: Berkshire Hathaway, the conglomerate led by Warren Buffett, made a major reduction in its substantial holding of Apple shares during the first quarter, concurrently witnessing its cash reserves swell to an unprecedented $189 billion.

Buffett's conglomerate reported record operating profits exceeding $11 billion, with its insurance operations benefiting from improved underwriting and increased income from investments amid rising interest rates.

The value of Berkshire's stake in Apple dropped by 22 per cent to $135.4 billion as of March 31, compared to $174.3 billion at the end of 2023, despite a mere 11 per cent decline in the tech giant's share price during the quarter.

Based on fluctuations in Apple's stock price, Berkshire seems to have divested approximately 13 per cent of its Apple shares in the quarter, concluding with approximately 790 million shares.

The sale marks a departure from Buffett's typical stance, as he is traditionally cautious towards the tech sector, but had recognised Apple as a consumer goods company with robust pricing power and a loyal customer base.

While some investors voiced concerns regarding Apple's weight within Berkshire's investment portfolio, the sales have left Buffett with a cash cushion exceeding six times the minimum $30 billion threshold he pledged to maintain. Berkshire realised $11.2 billion in after-tax gains during the quarter from investment sales.

In the first quarter, operating profit surged by 39 per cent to $11.22 billion, equating to approximately $7,807 per Class A share, up from $8.07 billion in the prior year. Net income, however, witnessed a 64 per cent decline to $12.7 billion, or $8,838 per share, compared to $35.5 billion in the previous year, primarily due to large unrealised gains reported in 2023.

Buffett urges investors to disregard the resulting volatility driven by an accounting rule mandating Berkshire to report such gains with its financial results.

Additionally, Berkshire repurchased $2.6 billion worth of its own stock in the first quarter and a smaller amount in the initial three weeks of April.

The company's results were disclosed ahead of its annual shareholder meeting in Omaha, an event that attracts tens of thousands of attendees. Buffett, at 93 years old, has steered Berkshire since 1965, transforming it from a struggling textile company into a conglomerate encompassing diverse businesses such as Geico, the BNSF railroad, Berkshire Hathaway Energy, Dairy Queen, and See's Candies.

Despite recession concerns and apprehensions about the banking industry, Berkshire's diversified portfolio is often viewed by investors, including Buffett enthusiasts, as a stable long-term investment option.

Among its various businesses, Geico saw its insurance profit surge by 80 per cent, driven by substantial growth in underwriting profit attributed to rate hikes and a significant decrease in the percentage of premiums allocated for accident losses. Conversely, profit at the BNSF railroad dipped by 8 per cent, partly due to reduced fuel surcharges and an unfavourable business mix.

Meanwhile, Berkshire Hathaway Energy experienced a 72 per cent profit increase, as improved operational performance from utilities mitigated rising legal expenses at the HomeServices of America real estate brokerage, associated with a nationwide settlement over brokerage commissions. Nevertheless, the energy division still confronts significant claims against its PacifiCorp unit stemming from Oregon wildfires in 2020.

(With Reuters inputs)