Apple’s stock is falling after Warren Buffett’s Berkshire Hathaway trimmed its stake

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Warren Buffett’s Berkshire Hathaway cut its shareholding in Apple, it largest stock investment, at the end of 2018, a bearish signal amid worries about the tech giant’s slowing iPhone sales.
The news sent Apple’s shares about 0.5% lower in pre-market New York trading. Shares in Oracle tumbled after Buffett also cut his stake in that company.
Investors follow what Berkshire buys and sells closely because of Buffett’s successful track record, and news of his holdings often moves share prices.
Buffett’s firm also increased investments in US banks including JPMorgan and Bank of America Merrill Lynch.

Warren Buffett’s Berkshire Hathaway cut its shareholding in Apple, it largest stock investment, at the end of 2018, a bearish signal amid worries about the tech Goliath’s slowing iPhone sales.

A regulatory filing late Thursday showed that Berkshire Hathaway’s stake in the tech giant fell 1% to 249.6 million shares in the three months to December 31 2018, down from 252.5 million in the previous three months.

The news sent Apple’s shares about 0.5% lower in pre-market New York trading as of 11.10 a.m in London (6.10 a.m. in New York) on Friday. Buffett also dumped stock of Oracle, sending that stock tumbling 2.9% in premarket trading.

Buffett’s assistant Debbie Bosanek said the shares sold were not under Buffett’s direct control. "One of the managers other than Warren had a position in Apple and sold part of it in order to make an unrelated purchase. None of the shares under Warren’s direction have ever been sold," she said in an email to Reuters.

Hedge funds are bailing on Apple

Still, investors follow what Berkshire buys and sells closely because of Buffett’s successful track record, and news of his holdings often moves share prices. At 88 years old, the investing guru is among the richest people in the world, worth an estimated $87 billion.

Other hedge funds have also reduced their exposure to Apple recently, according to Reuters:

Jana Partners reduced its stake in Apple by approximately 175,000 shares, or 63% of its position.
Soros Fund Management and David Tepper’s Appaloosa Management have both exited their holdings of AAPL.

Apple has struggled to keep investors excited. In its most recent earnings call it announced that revenue from iPhone, its main product, had declined 15%. It also missed its overall revenue guidance. The era of robust smartphone growth seems to be over as the market matures, reaching close to 100% saturation among consumers.

It’s a sharp charge from last year. Buffett helped send Apple shares to a record high in May 2018, making it the first trillion dollar company, after loading up on Apple shares.

Apple’s fortunes turned later in the year — its shares slid 30% from an October high while its holiday season sales underwhelmed.

Buffett is a bit of a technophobe

Buffett is notoriously sceptical on tech. Buffett doesn’t keep a computer on his desk, and he chooses to use a flip phone rather than a smartphone. He’s shied away from Google or Amazon shares.

"Buffett cares much more about the underlying fundamental strength of a company and its leadership than what is happening with the company’s stock price," Owen Murray, director of investments at Horizon Advisors, told U.S. News & World Report this week.

The US magazine outlined his investing philosophy: "He loves to identify companies with durable, competitive advantages in their respective industries."

Now he is looking at banks, and Red Hat

Buffett has also made contrarian moves against the rest of the market, such as his $5 billion investment in Bank of America in the wake of the 2008 financial crisis.

Buffett is bullish on banks again. The filing showed Omaha, Nebraska-based Berkshire Hathaway increased its holdings in JPMorgan and Bank of America Merrill Lynch despite a 14% drop in the S&P 500 Financials Index in the fourth quarter.

Apple has had a strong start to 2019, with its shares 8% up since the beginning of the year.

Other disclosures on Berkshire’s holdings, per the filing:

He added 4.2 million shares in software firm Red Hat, which was acquired by IBM on October 29. It’s unclear whether the company had the shareholding before or after the $34 billion acquisition.
Berkshire Hathaway also increased its holdings in regional lenders PNC Financial Services and U.S. Bancorp.

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Source: Business Insider – cburroughs@businessinsider.com (Callum Burroughs)