Monday, June 24, 2024

Warren Buffett is battling a bargain drought — and pared his Apple bet because it’s a ‘one-trick pony,’ expert says

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  • Warren Buffett is building up cash because he can’t find anything better, Ted Oakley said.
  • Buffett probably cut his Apple stake to reduce his exposure to the “one-trick pony,” Oakley said.
  • The financial advisor predicted Buffett would pounce on bargains regardless of the market backdrop.

Warren Buffett is stacking up cash because he’s battling a bargain drought — and he likely trimmed Apple because he felt overexposed to the iPhone maker, one expert says.

“You do have to watch and see what he’s doing,” Ted Oakley, the managing partner and founder of Oxbow Advisors, told Business Insider. “The facts are his cash levels keep going higher.”

Buffett’s Berkshire Hathaway cashed in about 13% of its Apple stock last quarter, fueling a $21 billion increase in its pile of cash and Treasurys to a record $189 billion.

“My guess is they’re selling more of it because they have a lot of it,” Oakley said.

Apple accounted for half of Berkshire’s $354 billion stock portfolio at the end of December. It remained its biggest holding with a 40% portfolio share at the end of March.

The computing behemoth is a “big cash generator,” but it’s essentially a “one-trick pony,” Oakley said. “They depend on one product when you get down to it.”

Indeed, Apple made $117 billion — or 55% of its net sales — from the iPhone in the six months to April 1, per its latest earnings.

Buffett and his team bought less than $3 billion of stocks in the first three months of this year, even as they sold $20 billion worth, marking their biggest quarter for selling in years.

“Evidently, he doesn’t see anything that jumps off the page at him,” Oakley said. But he predicted that a lofty market, an uncertain economic outlook, and geopolitical tensions wouldn’t stop Buffett and his team from pouncing once they do find value for money.

“When things are cheap, they buy them, and it really doesn’t make any difference where the market is,” Oakley said, pointing to the raft of lucrative deals that Buffett struck at the height of the financial crisis.

The veteran financial advisor also underscored that Berkshire is pocketing a solid return from owning Treasurys. The Federal Reserve’s inflation-busting hikes to interest rates since 2022 have boosted yields on government debt.

However, he echoed Buffett’s stated concerns about the national deficit and ballooning debt pile, warning the country is careening toward a point when it won’t be able to service the interest on its debt. “Warren Buffett knows that,” he said.

Reckless federal spending might also be one driver of “de-dollarization” with countries like China, Russia, India, and Saudi Arabia “trying to get away from the dollar,” he said.

Oakley sympathized with Buffett’s dearth of opportunities. He noted that Oxbow runs stock screens on more than 200 companies that it would like to own, and virtually all of them are expensive now.

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