Apple (NASDAQ: AAPL) has been a top Warren Buffett stock for years. The company's strong brand and loyal customer base give it a wide moat, making it relatively easy for the business to grow and become more valuable over the years, which is why Buffett loves the business.
But lately, the Oracle of Omaha has been selling shares of the iPhone maker. Apple no longer accounts for close to half of Berkshire Hathaway's portfolio, as the billionaire investor has been unloading shares of the company for multiple quarters -- the streak has now hit four consecutive periods.
What could be behind these moves, and should this raise red flags for investors holding Apple stock or those considering buying it today?
Berkshire has been loading up on cash
While investors have been buying up shares of stocks feverishly this year, one investor has been much more cautious -- Warren Buffett. And that's evident through Berkshire's growing cash balance, which as of the end of September totaled more than $325 billion. That's more than the $277 billion it reported just a few months earlier.
It could be a sign that Buffett isn't seeing many attractive buying opportunities in the market right now. And not only is Buffett not buying, he's also selling shares of Apple. This past quarter marked the fourth consecutive period where Berkshire reduced its position in the company. Although it is still the top holding in its portfolio, at just under $70 billion, that's nowhere near the more than $170 billion of Apple stock Berkshire held at the end of 2023.
Is this bad news for Apple investors?
Entering this week, shares of Apple were up around 15% since the start of the year. While that's not as strong as the S&P 500's gains of 26% during that stretch, Berkshire's sales haven't crippled the consumer goods stock by any means.
At $3.4 trillion, Apple is one of the most valuable stocks in the world, and Buffett may simply be looking to cash out some profits, especially as he voiced concerns in the past that the government may raise the tax rate on capital gains in the near future. For Buffett, the move could be more about protecting shareholders' returns than worries about Apple's rising valuation or its growth prospects.
That being said, Apple is by no means a cheap stock to buy -- it's trading at 37 times its trailing earnings, and its net sales have risen by just 2% over the past 12 months, totaling $391 billion. While that's a massive amount of revenue, for that kind of multiple, growth investors would typically be demanding much more growth.
Should you buy Apple stock?
Berkshire selling Apple stock shouldn't raise red flags for investors, but its valuation should have you thinking twice about investing in it today. The company's new Apple Intelligence capabilities aren't all that impressive, and the new iPhone may not end up being the huge growth catalyst for the business many analysts hoped it would be. And that can be a problem for a highly priced stock such as Apple, because its growth rate simply hasn't been all that strong this year.
If you're a long-term investor and are willing to hold on to Apple stock for years, then it can still be a solid investment, as given its vast user base and large ecosystem, it's likely to grow in the long run. Otherwise, you may be better off waiting on the sidelines or pursuing cheaper growth stocks instead, as it could be a bumpy ride for Apple in the months ahead.
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David Jagielski 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.
