Warren Buffett’s Strategic Shift: Apple Out, Energy In

Paul Ruffolo | March 1, 2024

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Warren Buffett’s investment decisions carry immense weight in the financial world. The legendary investor’s long-term focus and value-oriented philosophy have earned him widespread respect. His Berkshire Hathaway conglomerate exemplifies his belief in picking outstanding companies and holding them for extended periods – sometimes, as he’s famously quipped, “forever.”

Berkshire Hathaway’s success rests on a surprisingly concentrated portfolio, with its top five holdings accounting for around 75% of its total value. This highly focused approach bucks conventional wisdom on diversification, but Buffett’s track record speaks for itself.

Apple Trimming Raises Eyebrows

In a notable departure from his usual buy-and-hold practice, Berkshire Hathaway reduced its Apple (NASDAQ: AAPL) stake by 10 million shares in late 2023.  While a relatively small reduction (around 1%), it caught analysts’ attention, as Apple has long been the portfolio’s crown jewel. Berkshire Hathaway still maintains a gargantuan 5.9% ownership in Apple, valued at over $164 billion and generating nearly $870 million in annual dividends.

Expert Commentary: The Apple Dilemma

“Buffett’s modest Apple sale signals a potential shift in sentiment, though hardly a mass exodus,” comments veteran market analyst Jane Worthington. “The tech giant remains a core Berkshire holding. However, any substantive future selling by Buffett could put significant downward pressure on Apple’s share price.”

Energy Giants Get Renewed Love

Offsetting the Apple reduction, Buffett continues to bolster Berkshire Hathaway’s position in energy heavyweights Occidental Petroleum (NYSE: OXY) and Chevron (NYSE: CVX). Berkshire acquired millions of additional shares in both companies in early 2024.

Occidental Petroleum is now one of Berkshire’s most lucrative dividend payers, delivering nearly $900 million annually, a mix of common stock dividends and Buffett’s lucrative 8% preferred shares. Chevron’s sizable stake, worth billions and generating over $775 million in dividends each year, is further reinforced by news of its planned merger with Hess Corporation (NYSE: HES).

Expert Commentary: Energy Bet Pays Off

“Buffett’s continued enthusiasm for energy reflects not only a bullish outlook on the sector but also a shrewd bet on dividend income,” notes portfolio strategist Peter Lawson. “Occidental and Chevron offer a potent combination of share price potential and stable dividend streams – exactly the qualities Buffett prizes.”

Key Takeaways

  • Warren Buffett’s recent moves reveal a subtle yet potentially impactful change in the Berkshire Hathaway portfolio.
  • Apple remains a mainstay but could face headwinds if Buffett were to initiate a more aggressive sell-off.
  • The Oracle of Omaha’s embrace of energy giants underscores his belief in the sector’s enduring value and income potential.
  • Occidental Petroleum’s unique preferred share position offers Berkshire Hathaway an unusually high dividend yield.
  • Investors should watch for potential further adjustments in Berkshire’s holdings, as they often foreshadow significant market trends.