Does Warren Buffett know something that we don't?

What’s behind Buffett’s selling?

When it comes to the markets, there are few investors more legendary than the “Oracle of Omaha”, Warren Buffett. As the CEO of American multinational Berkshire Hathaway Inc., Buffett has become an icon, famed for his buy-and-hold investing style, as well as his huge – and hugely profitable – stakes in companies such as Apple and Bank of America.

Recently, Buffett has been making waves in the financial world by selling a staggering USD 97 billion in stocks in the first half of 2024. With Buffett’s every move eagerly watched and analysed, this unprecedented sell-off has investors worldwide asking what’s behind Buffett’s selling and what could it mean for the markets?

A giant slice of Apple

Buffett has been a long-time investor in Apple, a stock he had previously considered one of the “forever” holdings in his portfolio. So, when Buffett decided to reduce his stake in Apple, investors watched in surprise as Berkshire Hathaway sold approximately USD 90 billion worth of Apple shares in the first six months of 2024.

Billions in the Bank

Just as shocking, Buffett has also sold about 23% of his stake in Bank of America since mid-July. This mega-sale of roughly USD 10 billion in shares has dropped Berkshire’s ownership in Bank of America from 13.2% down to 10.2%. 

As a result of these two massive sell-offs, Berkshire Hathaway is now sitting on USD 325 billion in cash. That’s a lot of firepower for Buffett’s future investments or acquisitions.

Digging into the sell-off

The market is buzzing with possible explanations for Buffett’s selling spree, as investors try to fathom what it could mean for their own portfolios. Here are the top potential reasons:

• Profit-taking: The market has been hitting new all-time highs this year, so Buffett may simply be taking advantage of sky-high stock valuations and locking in gains.
• Tax considerations: The Oracle has actually spoken on this, citing the prospect of higher capital gains taxes as one reason for selling.
• Market caution: With geopolitical conflicts, recent US elections and the threat of inflation all adding to market uncertainty, Buffett may be playing it safe by increasing his cash position.
• Portfolio rebalancing: Every investor needs to adjust their holdings over time to keep their portfolio balanced – Buffett is no exception.
• Strategy switch: Berkshire could be shifting its strategy and looking for larger acquisitions that require more cash on hand. That huge capital reserve also means Buffett could invest in new emerging sectors or industries that he hasn’t focused on before.

What does it all mean for investors?

Buffett is too big to ignore – everything he does has an effect on investors. So, should Buffett’s recent selling – and his gigantic cash position – worry you? While it’s too early to tell, it’s important to remember that Buffett’s core investing strategy is based on long-term value and that time in the market beats timing the market, period.

While we can only guess what’s behind Buffett’s selling and his mind-blowing USD 325 billion cash position, the wisest course for investors is simple:

• Stick to your own long-term investment strategy
• Don’t make rash decisions based on short-term market moves

Buffett’s moves always provide food for thought, but in the end, he’s just one of many guideposts in the market. Still, you can be sure that investors will be watching closely to discover just what Buffett will do with his substantial cash reserves in the months ahead.