All right, put down that shovel and lend an ear: the Oracle of Ohama has something to say.
Warren Buffett is quoted so often by so many people that you sometimes wonder how the guy has time for anything else.
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The chairman and chief executive of Berkshire Hathaway (BRK.A) seems to have a bon mot for every investing occasion.
But if you’re going to listen to anyone, the ninth richest person on the Bloomberg Billionaires Index is probably a good choice.
This is a man who’s been known to say things like, “Never invest in a business you cannot understand.”
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While Buffett’s words of wisdom may seem eye-rollingly obvious to some people, the guy is worth 148 billion bucks after all.
Now take this one, for example:
“The most important thing to do if you find yourself in a hole is to stop digging.”
Warren Buffett, chairman and CEO of Berkshire Hathaway, has been parting company with some major companies. (Photo by: Lacy O’Toole/CNBC/NBCU Photo Bank/NBCUniversal via Getty Images)
Buffett cuts back on Apple stock
Sure, the comment sounds like a four-alarm “duh!” but many of us undoubtedly have personal experience with the all-too-human failing of making a bad situation even worse.
Investors gained some insights into Buffett’s recent stock activity through Berkshire Hathaway’s 13F filing with the Securities and Exchange Commission.
Related: Warren Buffett cuts Apple stake massively and artfully
Berkshire bought 1.28 million shares of the global pizza delivery chain Domino’s Pizza (DPZ) , valued at $550 million at the end of the third quarter.
And he added more than 400,000 shares of Pool Corp. (POOL) , a wholesale pool equipment distributor.
The choices point to Buffetts’ affection for brands, which he has described as “moats” that “protect excellent returns on invested capital.”
Buffett advises against taking yearly results too seriously and instead encourages investors to focus on four or five-year averages.
“The three most important words in investing are ‘margin of safety.’” he once said. “Risk comes from not knowing what you are doing.”
While Buffett takes a long view, he’s also a shrewd manager, unafraid to book profit or sell losers when he thinks it’s wise.
Last quarter, Buffett sold shares in three notable companies.
Berkshire Hathaway has been one of the biggest owners of Apple (AAPL) common stock for many years, and Buffett described Apple as one of the company’s “giants” in his 2021 shareholder letter.
“Tim Cook, Apple’s brilliant CEO, quite rightly regards the use of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well,” he said.
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Early this year, Berkshire Hathaway started selling its Apple shares, though, and as of Sept. 30, it had cut its stake by two-thirds.
Charlie Munger, Buffett’s friend and closest adviser, who died in 2023 at age 98, had lobbied Buffett to buy into Apple for years.Buffett resisted because tech companies worried him, but Munger kept arguing that Apple was as much a consumer company as a tech company.
Buffett, who still owns 300 million shares of Apple, cited tax concerns during Berkshire’s annual meeting in May as a possible reason for selling the iPhone maker.
Berkshire’s financial reports suggest its cost basis–what it paid for the shares–was $19.1 billion.
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UBS analyst David Vogt said in a Nov. 20 research note that wait time data continues to suggest soft iPhone demand ahead of the holiday selling season and AI update, according to The Fly.
The analyst, who made no change to his neutral rating and $236 price target, thinks there is limited upside to its 78 million sell-in unit estimate in the December quarter even as consumers familiarize themselves with Apple Intelligence, the company’s AI-powered system, as the data indicates that demand has been relatively muted so far.
Warren Buffett sells Bank of America stock
In the third quarter, Berkshire also sold Bank of America (BAC) , another of the conglomerate’s largest and long-held holdings.
Buffett began selling shares of Bank of America, the nation’s second-largest bank, in mid-July. The company’s shares are up nearly 39% year-to-date, and the stock has climbed 55.6% from a year ago.
Like Apple, Bank of America was a huge winner for Buffett. He acquired $5 billion of BofA preferred stock and warrants to purchase 700 million common shares in 2011, converting them into common stock in 2017. Reportedly, his cost basis is about $14 per share based on disclosures in 2021.
According to Barron’s, the average price he pocketed by selling shares is $41.
Buffett switches gears, unloads recent buy Ulta Beauty
And he also sold nearly all of Berkshire Hathaway’s stake in national beauty retailer Ulta Beauty (ULTA) , reducing shares by 96.5% after buying a substantial piece of the beauty retailer in the previous quarter.
He, or likely his lieutenants Todd Combs or Ted Weschler, bought $266 million worth of Ulta Beauty shares in the second quarter after they fell sharply in March. Reportedly, his average cost for those shares was $385.
Unfortunately, this trade likely didn’t move the needle for Berkshire, given that the shares broke down, trading below $330 in August and finishing the third quarter at $389.
William Blair analyst Dylan Carden Ulta Beauty to market perform from outperform without a price target on Nov. 20.
Carden said the decision was based on a “hard reset of expectations” after the company’s analyst day last month.
The analyst said that he believes Ulta’s comp and operating margin estimates are optimistic and embed expectations of an early 2025 inflection in the beauty category, which is unlikely.
The shares at current levels are “relatively fairly valued ahead of several quarters of uncertainty with risk of more sustained category deceleration and longer-term online cannibalization risk,” Carden said.
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