Why Buffett Slashed His Apple Stake | The Acquirer's Multiple®

During their recent episode, Taylor, Carlisle, and Tim Travis discussed Why Buffett Slashed His Apple Stake. Here’s an excerpt from the episode:

Tobias: Tim, one of the things we were talking about– Well, Buffett has been selling Wells Fargo for quite a while. So, Wells Fargo has idiosyncratic problems that he’s been selling. But I was a little bit surprised to see him punch out of so much Apple. If you read some of his comments before then, it did sound like this is one of his permanent holdings. Evidently, he’s just, I don’t know, trimmed because it’s run too much or something like that. But he’s been selling– [crosstalk]

Jake: Little more than a trim. [laughs]

Tobias: That’s a close shave.

Jake: Yeah. I was going to say, that’s like Tim went in for a haircut and got that.

[laughter]

Tim: Yes, yes. Barber doesn’t cost me a lot of money, nowadays, thankfully. [Jake chuckles] Yeah, you look at the valuation. Charlie Bilello had a tweet, maybe yesterday or two days ago, where he talked about Apple’s valuation. All the metrics were like 50% higher than historical averages. The growth rates really aren’t there to justify that. We’d all agree it’s an absolutely amazing business with incredible competitive advantages that are likely to stay for quite some time. So, it’s interesting.

So, I think from a valuation standpoint, that’s probably a big part of it. And then, I think you guys would probably agree, there’s also some level where he’s thinking about how he wants to leave that company for the next CEO. If you have such a big stake in Apple, that’s a huge amount of pressure. Because if you sell, “Oh, this idiot sold, you know, and missed out on these billions of profits.” And if you don’t sell, it’s like, “Oh, my gosh, Buffett would have sold.”

Jake: Yeah. “You’re spineless. You don’t make your own decisions.”

Tim: Yeah.

Jake: Kind of a no win for Greg, right?

Tim: It really is. Exactly. Is Greg going to be managing the core investments or–

Jake: I think Todd and Ted are primarily doing that. But I think Greg has final say on just about everything. So, I’m not sure exactly what something like Apple would look like there.

Tim: Yeah.

Tobias: You don’t know whose book that counts towards whether it’s his or whether it’s the–

Jake: Yeah. Not sure exactly where that would fall.

Tobias: So, you think this is the selling is more about– It’s like a setting it up for the next guy rather than–

Tim: I think it’s probably like 50/50 to some extent. I do think he’s looking at it as like, “Okay, I’ve made so much money off this.” The valuation is really extreme. He got burnt holding Coca Cola for too long. He’s definitely sensitive to valuations. He knows that if he were to say, “Okay, look, the stock market is in a bubble,” that’s going to piss off a lot of people, including, honestly politicians. It’s like, “All right, well, this guy’s trying to cause a bear market.”

He doesn’t want that responsibility. He shut down the partnership in 1969. 2000, he did the Sun Valley speech, or was it 1999, whatever. When he did the Sun Valley speech, talking about the tech bubble. So, you can see how he feels about the market by his actions and aggressively selling Apple, aggressively selling Bank of America. So, yeah, I think it’s probably 50/50.

Tobias: One thing I think is interesting is around 2007, he was pretty bullish. You can find a lot of comments from him at that time where he wasn’t– He wasn’t publicly bearish. A lot of people said, “Well, that’s because he’s transitioned from– He’s now a steward of the entire financial system. He got too big where he can’t shit talk the valuations anymore. He’s probably– I don’t know. Have you seen any comments from him recently? Has he made any comments about the level of the market?

Tim: I haven’t heard much. How about you, Jake?

Jake: No, but he definitely talked in 2021 about relative– Last year, he did say, like, he thinks that this is the most gambling ethos that he’s seen, which really says something. That’s a lot of years of market history to filter through that prism and to find this period as the most gambly is. Yeah, that says something.

Tobias: I thought there was a lot of gamble in the market, but I haven’t been looking at it for that long. But I did see 2000. There’s a lot of gamble in 2000 too. I don’t know if there’s more gamble now. Maybe, because there’s so many other ways that you can gamble, including on elections.

Jake: Quite easy. Yeah.

Tim: Yeah.

Jake: Quite easy.

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