Business

Why Warren Buffett’s billions in cash at Berkshire Hathaway is a bearish stock market signal

Queue the bears.

Berkshire Hathaway’s (BRK-A, BRK-B) cash flow hit a new record of $189 billion in the first quarter, the industrial giant announced in its earnings release Saturday.

This massive war chest will likely reach $200 billion by the end of the current quarter, Buffett told shareholders at a packed CHI Health Center today.

Such a hoard of greenbacks indicates that Buffett is currently “bearish” on the stock market, according to one seasoned value investor.

“Buffett is bearish on the stock market. He’s showing it by increasing his massive treasury to $200 billion, selling Apple (AAPL) stock and saying he doesn’t see any good deals,” Bill Smead, CIO of Smead Capital Management and observer, told me Buffett’s long-time stand on the grounds of Woodstock. of capitalism.

Berkshire’s decision to reduce its stake in Apple and increase the company’s cash flow is a move that Buffett says makes sense given the current macroeconomic environment.

“I don’t think anyone sitting at this table knows how to use it effectively, and therefore we don’t use it,” Buffett said in response to a shareholder question asking why Berkshire isn’t leveraging the cash reserve. .

“As the world becomes more sophisticated, complicated and intertwined, more problems can occur” and you want to be able to “act when that happens,” Buffett added.

The bears have meat to feast on, compliments of Buffett.

Berkshire reduced its position in Apple by about 13% in the first three months of the year, marking the second straight quarter the conglomerate has reduced its stake in the iPhone maker.

As of March 31, Apple accounted for about 40% of Berkshire’s vast stock portfolio, worth a total of $135.4 billion.

Berkshire reduced its position in Apple as the tech giant has struggled in recent quarters and the stock’s valuation remains high. The stock fell about 10% in the first three months of the year, weighing on Berkshire’s quarterly results.

While some initially viewed Buffett’s decision to reduce Apple’s stake as a sign that his stance on the tech beast had changed, one analyst told Yahoo Finance that “taking a little height off it doesn’t hurt.”

“It doesn’t really concern us because Apple had a very large position in the 13-F portfolio at the end of 2023, so anything that could reduce that exposure is good from a diversification standpoint,” Greggory told me. Morningstar analyst Warren at Morningstar press conference. meeting.

The legendary investor was quick to reassure shareholders of his confidence in Apple.

“At the end of the year, I think it’s extremely likely that Apple will be the largest portfolio of common stocks that we have right now,” Buffett told a packed audience that included Apple’s CEO. ‘Apple, Tim Cook.

Harold and Caroline Ernst of St. Louis talk with other shareholders while waiting for the start of Berkshire Hathaway's annual meeting on Saturday, May 4, 2024 in Omaha, Neb.  (AP Photo/Rebecca S. Gratz)Harold and Caroline Ernst of St. Louis talk with other shareholders while waiting for the start of Berkshire Hathaway's annual meeting on Saturday, May 4, 2024 in Omaha, Neb.  (AP Photo/Rebecca S. Gratz)

Harold and Caroline Ernst of St. Louis talk with other shareholders while waiting for the start of Berkshire Hathaway’s annual meeting on Saturday, May 4, 2024 in Omaha, Neb. (AP Photo/Rebecca S. Gratz) (ASSOCIATED PRESS)

Buffett compared Apple to two of Berkshire’s best-known and largest stocks: Coca-Cola (KO) and American Express (AXP). While calling Coca-Cola and American Express “wonderful companies,” he noted that Apple was “an even better company.”

Although Buffett remains bullish on Apple, the company faces near-term headwinds.

China’s weakness has been a focus of Apple investors’ concerns as the country loses market share to domestic players. A more cautious U.S. consumer hasn’t improved investor confidence either.

“It’s easy to blame the overall consumer environment, but there are also market share dynamics happening with Huawei and others becoming extremely competitive,” Christine Phillpotts, senior vice president of emerging markets stocks from Ariel Investments, at Berkshire’s annual meeting.

This is a trend that Phillpotts says will likely accelerate as domestic players continue to “increase the value proposition.”

Apple shares have fallen 4.8% year to date despite upcoming AI announcements, well below the S&P 500’s 8% gain.

Buffett’s cash flow suggests other stocks could follow Apple’s lead lower as the year progresses.

Curious about what Apple faces in terms of AI competition? Yahoo Finance Editor-in-Chief Brian Sozzi explains Amazon’s AI plans with AWS CEO Adam Selipsky in a new episode of the Opening Bid podcast below.

Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Email seanasmith@yahooinc.com.

Click here for in-depth analysis of the latest stock market news and events that move stock prices..

Read the latest financial and business news from Yahoo Finance



News Source : finance.yahoo.com
Gn bussni

Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe. Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
Back to top button