Prediction: Warren Buffett and Berkshire Hathaway Sold $25 Billion in Apple Stock in Q4

Apple (NASDAQ: AAPL) has been one of Warren Buffett and Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) most profitable and famous investments. However, they've been selling off their shares pretty methodically lately.

Berkshire's Apple holding peaked in third-quarter 2023, when it held over 900 million Apple shares, valued at over $150 billion. This made up 50% of its investment portfolio, a significant concentration in one stock. As of Q3 2024, Berkshire owned 300 million shares of Apple stock, valued at just shy of $70 billion.

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This was a decrease from the 400 million shares Berkshire owned in the second quarter and the 789 million it owned in the first. This pattern is pretty clear, and I think it's safe to assume that Warren Buffett and Berkshire sold another $25 billion worth of stock in the fourth quarter.

Apple may not be Berkshire's largest holding anymore

One of the first questions an investor may have is, how am I getting this information about what Buffett and Berkshire are trading? Any company with over $100 million in investments is required to report its end-of-quarter holdings to the SEC each quarter. Then, those holdings are released to the public 45 days after the quarter closes in a document called a 13F.

While this doesn't give a perfectly accurate view into the current holdings, it gives investors an idea of where the company is heading, especially for long-term-minded investors like Warren Buffett. The next round of 13F filings is due on Feb. 14, so we'll get an idea of what Buffett has been doing shortly.

Apple is still Buffett's largest holding, making up around 23% of his investment portfolio. The next biggest investment, American Express (NYSE: AXP), totals 16%. However, if my prediction that Buffett has sold another 100 million shares of Apple (worth around $25 billion) comes true, then Apple would become Buffett's second-largest holding, unless he sells off or adds to some of his other holdings in a dramatic fashion.

So why is Buffett selling off Apple? After all, he's been a proponent of the business for a long time.

Apple's business hasn't grown over the last three years

Apple is not the business today that is was when Buffett first invested in it during Q1 2016. Back then, Apple was a dirt cheap stock, yet it was the dominant consumer electronics brand, and there was still a ton of growth and innovation happening in the smartphone market, Apple's largest segment.

Apple's average price-to-earnings (P/E) ratio during Q1 2016 was 10.6. It has now risen to a significantly higher level, trading for 37 times earnings.

AAPL PE Ratio data by YCharts.

That means investors are willing to pay nearly four times as much for Apple's stock now as they were in 2016. This fact is a big reason why Apple's stock has been such a successful investment, as its earnings per share (EPS) haven't risen nearly as much during that same timeframe.

AAPL EPS Diluted (TTM) data by YCharts.

The biggest issue with Apple's stock is the EPS plateau that Apple has been on. Since 2022, Apple's revenue and earnings haven't grown in any appreciable manner.

AAPL EPS Diluted (TTM) data by YCharts.

This is further exaggerated by the fact that inflation has raged during the past few years. Using the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) inflation calculator, the purchasing power of $1 in today's money is the equivalent of $1.12 in January 2022's money. That means Apple's earnings and revenue have actually fallen on an inflation-adjusted basis, which isn't a good sign for the investment.

However, since 2022, Apple's stock has risen more than 30%. If you removed Apple's name from the stock and presented just this information, you would assume the stock is significantly overvalued. But somehow, because the name "Apple" is on the stock, it's justifiable.

While the brand name is worth something, I think investors need to take a look at what's happening to Apple, as it hasn't been able to show meaningful growth in some time. Buffett and his crew at Berkshire realize this and are getting ahead of the curve by selling early. After all, it's not easy to sell off a position the size of Buffett's without making waves in the market.

Apple is no longer a value stock like Buffett and his team look for. It's also not a growth stock, leaving Apple in a bad position: Overvalued. While I think Buffett and his team will have sold off around 100 million shares in Q4 (which we will know about for sure on Feb. 14), I wouldn't be surprised if it's more. I think Buffett is on the right side of this trade, and anyone owning Apple shares should follow his lead.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.