Warren Buffett Reveals the Real Reason Berkshire Has Been Dumping Apple Stock

For years, billionaire investor Warren Buffett has admired tech giant Apple (AAPL 1.16%) and its highly successful business model. And so investors may have been perplexed to see that his company, Berkshire Hathaway (BRKA +0.00%)(BRKB +0.21%), had been drastically reducing its position in the tech giant in recent years.

Buffett, however, recently revealed why Berkshire was selling Apple stock, and it had absolutely nothing to do with the company’s business or concerns about its future growth.

Apple is still Berkshire’s largest holding, but it’s a much smaller position than it was in the past

Apple has been a staple in Berkshire’s portfolio, but in recent years, Berkshire has not only been trimming its position in the tech company, but it’s been drastically unloading it. From its peak, Berkshire has reduced its stake in Apple by more than 75%. While it’s still the top holding and the position is worth close to $60 billion today, it no longer accounts for more than half of the portfolio, as it did in the past.

And that, it seems, was the big problem for Buffett. “I wasn’t happy for it to be larger than everything else combined.” Today, Apple’s stock accounts for just under 19% of Berkshire’s portfolio, with American Express not being far behind at 15%. A few years ago, the delta was much more significant between the first and second holdings.

Another factor that may have played a big role in Buffett’s decision to sell Apple stock was likely the significant profit the company was sitting on from the position. Berkshire has made over $100 billion in profit on the sale of Apple stock. And with uncertainty around taxes and how capital gains might be treated in the future, securing those profits may have motivated Buffett to sell sooner rather than later.

Both companies remain on solid trajectories

Over the past five years, both Berkshire and Apple have been solid investments, with the former generating returns of 79% and the latter nearly doubling in value. Going forward, they still look like terrific investments to buy and hold.

Apple’s vast ecosystem has enabled the business to grow, even without the company needing to lead in innovation. Its iPhones are still iconic and are effectively a gateway to consumers spending more on other Apple products and services. Berkshire, meanwhile, is under a new CEO in Greg Abel, but its vision remains the same. Investors may be less enamored with the stock now that Buffett has retired, but it’s still a terrific business to invest in, given its careful and thoughtful approach to capital allocation and investing in quality companies.

It’s hard to go wrong with either one of these stocks, particularly when looking at the long term.