Few investors and companies have as much control over their movements as Warren Buffett and Berkshire Hathaway (BRK.A) (BRK.B -0.82%). But I guess that’s what happens when your investments over the decades have built you a net worth of over $145 billion and a market cap in excess of $1 trillion.

One move in particular that has attracted a lot of investor attention is Berkshire Hathaway’s decision to sell a large portion of its business. Apple (AAPL 0.36%) actions.

In the first half of 2024, Berkshire Hathaway sold approximately 505 million of its Apple shares, selling 115 million in the first quarter and 390 million in the second. This brought Berkshire Hathaway’s share count to 400 million, or 29.4% of its stock portfolio.

Apple still belongs to Berkshire Hathaway largest exploitation by a solid margin. Its second largest holding is American Expresswhich represented 13.1% of the stock portfolio. Bank of America (10.3%), Coca-Cola (8.7%), and Chevron (5.7%) completes its top five titles.

Considering how much Berkshire Hathaway has reduced its stake in Apple, many investors are wondering if they should take this as a warning of things to come and follow the lead of Buffett and Berkshire Hathaway. If you ask me, I think the answer is no, and here’s why.

Why would Berkshire Hathaway sell so much Apple stock?

There are several reasons for the recent sell-off. For starters, Buffett and Berkshire Hathaway probably believe money is king at present, given higher interest rates and what many consider to be high stock market valuations.

Apple probably falls into the latter category. It trades at 31 times its projected earningswell above its average over the past five years and much higher than when Berkshire Hathaway began building its stake in 2016.

AAPL PE ratio (forward) data by Y charts.

Another reason could be that Buffett and Berkshire Hathaway now want to secure some profits before a possible price increase. capital gains tax rate (a move proposed by presidential candidate Vice President Kamala Harris).

When you sell stocks worth billions of dollars, a few percentage point differences in capital gains tax can add up to a considerable sum. By locking in their gains at the current relatively low tax rate (21% for corporations), Buffett and Berkshire Hathaway could save themselves and their investors millions, if not billions, of dollars in the future.

Should investors follow the decisions of Buffett and Berkshire Hathaway?

If you’ve already invested in Apple, I don’t think there’s any reason to sell any of your stocks at this time. The tax reason makes sense for a company that owns hundreds of millions of shares, but the benefit won’t be the same for your ordinary investor.

Apple is still a world-class company that captures the attention (and money) of billions of people around the world. In its most recent quarter (ended June 29), Apple generated $85.8 billion in revenue. Its 21.5 billion dollars net income is more than AdobeRevenues from its last four quarters combined. Needless to say, Apple is still a cash cow.

However, Apple’s recent revenue growth (or lack thereof) and valuation begs the question “Should you follow Buffett?” » question much more difficult to answer.

AAPL Operating Income (YoY Quarterly Growth) data by Y charts.

Apple is not valued as a company that only experiences 5% year-over-year revenue growth. I still believe the company commands a premium price, but it’s surely something investors shouldn’t overlook.

However, if you’re in it for the long term, I don’t think current valuations should stop you from investing in Apple. The crisis in the global smartphone market has taken a toll on Apple’s revenue (the iPhone accounts for 45% of its total revenue), but the company is taking steps to revive sales and shorten the cycle. upgrade.

Buffett once said, “It’s far better to buy a great business at a fair price than a fair business at a great price.” Whether you consider current prices “fair” is relative, but there’s no denying that Apple is a wonderful company. Long-term investors should keep their eyes on the future.