Apple hits a new high, Buffett "misses the sell," earning $50 billion less

Warren Buffett's Berkshire Hathaway's decision to significantly reduce its holdings in Apple stock in 2024 and 2025 has caused the investment giant to miss out on approximately $50 billion in paper gains.

On Monday, as market optimism about the iPhone's prospects reignited, Apple's stock price rose nearly 4%, bringing its market capitalization to $3.89 trillion, surpassing Microsoft to become the second-largest company by market value in the United States. This strong rally has made Berkshire's previous decision to reduce its holdings particularly noteworthy.

(Apple's market capitalization approaches $4 trillion)

According to disclosures, as of June 30 this year, Berkshire's holdings in Apple have plummeted from 906 million shares at the end of 2023 to 280 million shares, with most of the sales occurring in the second quarter of 2024, during which nearly 4 million shares were sold. It is estimated that Berkshire's decision to sell two-thirds of its Apple holdings has cost the company about $50 billion in potential earnings.

At the time, this large-scale reduction seemed somewhat unexpected, as Buffett had previously ranked Apple alongside Berkshire's insurance, utilities, and railroad business (BNSF), calling it one of the four "pillars" of the company's value, which had suggested that Apple could be a "permanent holding" for Berkshire, like American Express and Coca-Cola.

High "Opportunity Cost"

According to Buffett's disclosure in the 2021 shareholder letter, Berkshire's initial average cost for purchasing about 1 billion shares of Apple stock was approximately $35 per share.

It is estimated that Berkshire's average selling price for Apple stock was around $185 per share, generating over $90 billion in pre-tax gains last year and about $6 billion so far in 2025.

However, at Apple's current stock price of nearly $262, this is nearly $80 higher than Berkshire's estimated average selling price. This means that the shares Buffett "sold too early" missed out on approximately $50 billion in appreciation.

Additionally, this substantial gain is subject to high taxes. It is estimated that Berkshire paid nearly $20 billion in corporate income tax on the sale of Apple stock, roughly $30 per share, which would reduce its net gain to about $155 per share.

Why Did Buffett Sell?

There are various interpretations in the market regarding Buffett's motivation for selling Apple stock.

Buffett himself hinted at the Berkshire annual shareholder meeting in May 2024 that the potential increase in corporate tax rates was a consideration.

Some observers of Berkshire believe that the reduction was due to the excessively high proportion of Apple in its portfolio. This investment once accounted for over 40% of Berkshire's stock investment portfolio, and through this reduction, Apple's proportion has been lowered to about 25%, effectively diversifying risk. There is also market speculation that Buffett hopes to further bolster cash reserves before stepping down as CEO by the end of 2025, to strengthen the company's already robust balance sheet. As of June 30, Berkshire held over $330 billion in cash.

Given the strong performance of Apple's stock, it cannot be ruled out that Buffett may further reduce his holdings in the third quarter, with relevant data to be released in mid-November.

Not just Apple, Bank of America also "missed the boat" on reductions

In fact, Berkshire has also reduced its stake in another major holding, Bank of America, over the past year.

It is estimated that Berkshire sold about 400 million shares of Bank of America, a reduction of about 40%, bringing its holdings down to just over 600 million shares, with a market value exceeding $30 billion.

On Monday, Bank of America closed up 1.48% at $52, while Berkshire's selling price was just over $40, which means there is about $4 billion in potential gains that have not been realized.

(Bank of America closed up 1.48% on Monday)

Berkshire's Class A shares closed at $740,600 on Monday, up about 9% year-to-date, lagging behind the S&P 500's total return of 16%. Analysts believe that the reduction in Apple holdings may be one of the dragging factors.

If Berkshire still held over $230 billion in Apple stock, its stock performance would likely be even stronger