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Warren Buffett slashes Apple stake as he boosts cash to record high

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Warren Buffett slashes Apple stake as he boosts cash to record high

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Warren Buffett continued to slash his stake in Apple as part of a selling spree that has seen his Berkshire Hathaway dump $166bn worth of stocks over the past two years, with the Oracle of Omaha finding few other opportunities to chase in the US stock market.

The sprawling industrial and investment conglomerate disclosed on Saturday that it had reduced its position in Apple to $69.9bn in the third quarter, indicating it had shed a further 100mn shares in the three-month period.

In just over a year, Buffett has ditched almost two-thirds of his stake in the technology company, which at its peak in 2023 accounted for $178bn of the company’s stock portfolio.

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The stock sales are a dramatic shift by Buffett, given in 2022 he described Apple as one of Berkshire’s “four giants”, accounting for the bulk of the company’s value. At the company’s shareholder meeting in May he described the iPhone maker as “an even better business” than Coca-Cola and American Express, two of Berkshire’s longtime holdings.

“Unless something dramatically happens that really changes capital allocation strategy, we will have Apple as our largest investment,” Buffett told shareholders at the time.

“But I don’t mind at all, under current conditions, building the cash position,” he added. “I think when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.”

Buffett said that he believed there was a high likelihood the US federal government would raise tax rates in the coming years given the country’s sustained budget deficits, which would reduce Berkshire’s profits on future stock sales.

Berkshire reported on Saturday that it had generated gains of $97bn on the $133bn of stock it has sold this year, which after taxes amounted to a $76.5bn pay-off for the group.

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“It’s still the greatest trade of all time by the greatest investor of all time,” said Christopher Rossbach, chief investment officer of longtime Berkshire shareholder J Stern & Co.

“The investment in Apple has defined his last decade and the fact that he is selling Apple now for valuation reasons is testament to his sticking to his principles at a scale that no one has before.”

The billionaire investor has been selling more than just Apple. Over the course of the three months to September, Berkshire sold $36.1bn of stocks, including part of its large position in Bank of America. In October, he reduced his stake in Bank of America below 10 per cent after selling more than $10.5bn worth of the US lender’s stock, an investment that dated back to the global financial crisis.

He has found little else to entice him in the US stock market, buying equities worth just $1.5bn. The 94-year-old has been jettisoning stocks at a remarkable clip, with Berkshire being a net seller of equities for eight consecutive quarters.

Even Berkshire shares were off-limits to the noted value investor, who controls the company’s stock buyback programme. Berkshire did not repurchase any of its shares in the third quarter.

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Buffett in turn ploughed the proceeds from those sales back into short-term Treasury bills, pushing the company’s cash position to a record $325.2bn.

Column chart of Quarterly investment income ($bn) showing Berkshire’s interest income has surged as the Fed has raised rates

The sales raise questions over Buffett’s motivations and his investment outlook, with the investor stockpiling an enormous level of cash unseen in the investment world.

He has been content to earn the relatively high yields on short-term US Treasury bills, even as the Federal Reserve has started to cut interest rates. The company earned nearly $10bn in interest on its cash and Treasury position over the past 12 months, including $3.5bn in the third quarter.

He has built up the company’s cash position before, saying the mountain of liquidity gives Berkshire an ability to pounce in a crisis. However, the company has faced far better capitalised competitors in the years since the financial crisis. Heavyweights in the investment world, including Apollo and Blackstone, are often stepping in to finance companies looking to shore up their balance sheets.

It will set up a challenge for Buffett’s heir apparent, Greg Abel. The 62-year-old energy executive has been charged with leading Berkshire when Buffett eventually steps down, including having oversight over its $271.7bn stock portfolio.

The stock sales were disclosed as part of Berkshire’s quarterly earnings, which showed a decline in operating profits. The company’s insurance businesses have been buffeted by two hurricanes that pounded the south-east US.

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Line chart of Total return, including dividends (%) showing Berkshire shares have outpaced the S&P 500 over the past 5 years

Berkshire said Hurricane Helene resulted in losses of $565mn in the third quarter, and that it anticipated losses of between $1.3bn and $1.5bn in the fourth quarter from Hurricane Milton, which struck Florida days later.

The insurance business has also agreed to pay $535mn to resolve asbestos-related talcum powder liabilities, pushing its reinsurance unit to a loss for the quarter.

Overall, operating profits fell 6 per cent from a year earlier to $10.1bn. Buffett has long directed investors to its operating results, which do not include the swings in value of its mammoth stock portfolio. He has warned that reported net income is meaningless given the volatility of the stock market. In the quarter, net income swung to $26.3bn from a loss of $12.8bn a year before.

Class A shares of Berkshire have rallied 25 per cent this year, outpacing the total return of the S&P 500.

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Video: The County That Got Every President Right (Since 1980)

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Video: The County That Got Every President Right (Since 1980)

One county in Washington State has picked the winner in every presidential election since 1980. Astead W. Herndon, a national politics reporter and the host of the politics podcast “The Run-Up,” visited the county last year. Now, he returns in the last days before Election Day to see if voters’ views have changed.

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Warren Buffett’s Apple trade exposes Berkshire’s dilemma

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Warren Buffett’s Apple trade exposes Berkshire’s dilemma

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What is the next great investment idea? And what are the chances that Warren Buffett will be the person to identify it? Wall Street likes his odds. Shares in the class B of Berkshire Hathaway are up 25 per cent so far in 2024. And the rally comes as Buffett has been rapidly paring back his blockbuster win in Apple stock.

On Saturday, Berkshire Hathaway reported its third-quarter results, most notably that its cash and marketable securities balance had swelled to $325bn. A big chunk of that has come from share sales of Apple whose value for Berkshire now stands at $70bn, down from a peak of $178bn. Berkshire invested initially in Apple in 2016 when its share price was around $25 a share. Today Apple trades above $200.

Berkshire’s total book value through the third quarter was $631bn, while its public equity market capitalisation is just shy of $1tn. That premium to net asset value reflects a vote of confidence from shareholders that Buffett, at 94, has another similar masterstroke in him.

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Buffett for now, however, is increasingly content to clip US Treasury coupons earning a few percentage points, risk free, with no dividends or real buybacks for Berkshire shareholders. 

It comes as other big pools of capital — alternative asset managers as well as BlackRock — are pouring funds into all types of plain and exotic private credit as well as long-tailed infrastructure and data centre deals. Blackstone, for example, has deployed $123bn in the past 12 months mostly away from either public or even private equity.

To be sure, Berkshire’s property and casualty insurance business carries out all sorts of sophisticated trading and hedging activities. But the investment group is best known for largely buying public, large-cap equities as well as mega operating business platforms such as power utilities and railroads. In the absence of a financial markets crisis where Buffett could play white knight to handsome reward, there is a question in calm markets if he needs to choose less vanilla securities.

The sheer size of Berkshire now makes it hard to find single investments that can move the needle. Its securities portfolio of more than $300bn has fewer than 30 stocks and the next Apple probably needs to be an up-and-coming Big Tech luminary. Buffett’s Apple bonanza helped obscure the dearth of juicy opportunities for Berkshire. That dilemma is now back on the table.

sujeet.indap@ft.com

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Quincy Jones, pop mastermind and 'Thriller' producer, dies At 91

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Quincy Jones, pop mastermind and 'Thriller' producer, dies At 91

Quincy Jones pictured in Beverly Hills in 2017.

Chris Delmas/AFP via Getty Images


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Chris Delmas/AFP via Getty Images

Quincy Jones pictured in Beverly Hills in 2017.

Quincy Jones pictured in Beverly Hills in 2017.

Chris Delmas/AFP via Getty Images

Quincy Jones, whose decorated music career ran from the early 1950s through the best-known works of Michael Jackson and beyond, died Sunday. He was 91.

His death was confirmed by his publicist in a statement to NPR that did not mention the cause of death. The statement said that Jones died peacefully at his home in Bel Air, California, surrounded by his family.

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“Tonight, with full but broken hearts, we must share the news of our father and brother Quincy Jones’ passing,” the family said in the statement provided by Jones’ publicist, Arnold Robinson. “And although this is an incredible loss for our family, we celebrate the great life that he lived and know there will never be another like him.”

In the 1980s, Jones helped oversee some of music’s biggest and most widely loved moments: He produced or co-produced three of Michael Jackson’s best-selling albums, including 1982’s record-setting Thriller, and was heavily involved in crafting USA for Africa’s 1985 charity single “We Are the World.” But his career extended for decades in each direction. Jones long held the record for most Grammy nominations with 80, before Jay-Z and Beyoncé surpassed the total earlier this decade, and his 28 wins rank him third behind Beyoncé (32) and conductor Georg Solti (31).

Born Quincy Delight Jones in 1933, Jones got his start in jazz — at 19, he played trumpet in Lionel Hampton’s band — and soon performed on stages with some of the world’s best-known stars: Ray Charles, Frank Sinatra, Elvis Presley.

In the 1960s, Jones became a decorated film composer — he collected three of his seven career Academy Award nominations in 1968 and ’69 — as well as a high-profile music-industry executive, arranger and producer. On albums like The Great Wide World of Quincy Jones and Quincy Jones Plays Hip Hits, he was the headliner, but he also worked behind the scenes, producing (among many others) a string of bestselling hits for Lesley Gore.

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In the ’70s, Jones remained in the spotlight as a performer and executive, expanding his reach with high-profile projects such as the soundtrack to The Wiz. But the 1980s found his name attached to a remarkable string of successes, from “We Are the World” and Thriller to his first foray into film production: 1985’s The Color Purple, which made movie stars of Oprah Winfrey and Whoopi Goldberg. Jones’ star-packed Back on the Block, released in 1989, won the Grammy for album of the year in 1991.

Jones’ successes extended well beyond music and film. Shortly after launching Quincy Jones Entertainment in 1990, he was presiding over long-running TV hits such as The Fresh Prince of Bel-Air and MADtv. His 2001 book Q: The Autobiography of Quincy Jones detailed his many intersections with music’s biggest moments and stars, as well as his mental-health battles and rocky upbringing in Chicago. Jones’ philanthropic works extended well beyond USA for Africa and benefited causes such as music preservation, arts education and aid for underprivileged youth.

Jones’ tumultuous personal life included three marriages and seven children, including actresses Kidada and Rashida Jones — his daughters with actress Peggy Lipton — and Kenya Kinski-Jones, a fashion model whose mother is German actress and model Nastassja Kinski.

NPR’s Ayana Archie contributed reporting.

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