Billionaire Warren Buffett Sold 67% of Berkshire's Stake in Apple and Is Piling Into a Beloved Consumer Brand Whose Stock Has Soared by 7,000% Since Its IPO

There isn't a money manager who commands more attention from the investment community than billionaire Warren Buffett. In his nearly six decades as CEO of Berkshire Hathaway (BRK.A) (BRK.B 0.55%), the aptly dubbed "Oracle of Omaha" has overseen a cumulative return in his company's Class A shares (BRK.A) of greater than 5,660,000%, as of the closing bell on Nov. 14.

Buffett's ability to consistently outperform Wall Street's major indexes over lengthy timelines has some investors eager to ride his coattails. Thanks to Form 13F filings with the Securities and Exchange Commission, this can be done with relative ease.

A 13F is a required filing by institutional investors with at least $100 million in assets under management. It provides investors with a snapshot of which stocks Wall Street's smartest money managers purchased and sold in the latest quarter. Nov. 14 was the filing deadline to disclose trading activity for the September-ended quarter.

Consistent with Berkshire Hathaway's 13Fs over the last two years, Buffett and his team have been net sellers of equities and very selective buyers. Based on the latest round of 13Fs, one top holding continues to get the heave-ho, while another beloved consumer goods brand is suddenly a popular buy.

Shares of Berkshire's top holding continue to be shown to the door

Based on Berkshire Hathaway's consolidated cash flow statements, Buffett and his team have sold more stocks than they've purchased for eight consecutive quarters (dating back to Oct. 1, 2022), totaling an aggregate of $166.2 billion. No stock accounts for a greater percentage of this $166.2 billion than top consumer brand Apple (AAPL -1.41%).

Over the trailing year, ended Sept. 30, Berkshire Hathaway has sold 615,560,382 shares of Apple, which reduced its stake in Wall Street's second-largest company by a staggering 67%. Keep in mind that even after dumping 615.56 million shares of Apple, it's still Berkshire's largest holding by almost $25 billion in market value.

During Berkshire Hathaway's annual shareholder meeting in early May, Buffett opined during the question-and-answer session with investors that the corporate income tax rate would likely head higher. He thus intimated that selling Apple's stock was a way for Berkshire to lock in sizable unrealized gains at a favorable tax rate.

However, with Donald Trump winning the presidency and Republicans controlling both houses of Congress, corporate income tax increases look to be firmly off the table for at least the next four years. Considering that Apple's stock has risen significantly on its artificial intelligence (AI) aspirations as Buffett has sold, it's fair to say that Berkshire Hathaway has missed out on a pretty penny in gains.

But there may be more to this selling activity than meets the eye.

Even though Warren Buffett hinted at tax-related selling at Berkshire's annual shareholder meeting, he might be less than impressed with Apple's valuation. The Oracle of Omaha is an ardent value investor, and Apple is currently trading at 38 times trailing-12-month earnings. Apple's historically high valuation multiple is on par with the S&P 500's Shiller price-to-earnings (P/E) ratio hitting its third-highest valuation multiple, when back-tested to January 1871.

Additionally, Apple's physical product sales have stalled over the last two years. While subscription services growth has been robust, demand for iPhone, Mac, iPad, and accessories has been lukewarm, at best.

There's a new apple of Warren Buffett's eye

Despite being a big-time net seller of stocks in 2024, Warren Buffett and his top investment advisors, Todd Combs and Ted Weschler, have done some very selective buying. Examples include building up their stake in Wall Street's most-popular reverse stock split, Sirius XM Holdings, as well as adding to property and casualty insurer Chubb, which was Berkshire's confidential holding until mid-May.

During the September-ended quarter, Buffett and his team did very little buying... with one exception. The largest purchase of the third quarter was to open a brand-new position in beloved fast-food restaurant chain Domino's Pizza (DPZ -1.27%). The 1,277,256 shares purchased equated to almost $550 million in market value, as of the end of September.

Domino's Pizza has been one of the top-performing stocks on Wall Street since its initial public offering (IPO) in 2004. Since its debut on July 13, 2004, shares have catapulted higher by more than 7,000%, factoring in dividends and the robust after-hours move associated with Berkshire Hathaway's 13F filing.

In December of last year, Domino's introduced its five-year plan that it dubbed "Hungry for MORE." The reason "MORE" is capitalized is because it represents an acronym for the ways the company aims to improve its operating efficiency and customer loyalty in the years to come.

Domino's "M" is about creating the "most delicious food," and is inspired by new menu offerings and the consistency of its food-prep process. The "O" stands for "operational excellence" and is focused on food consistency and maximizing output through its proprietary tech-driven operating system. The "R" is about "renowned value" and relates to the company's rewards program, which is designed to keep customers loyal to the brand. Lastly, the "E" is for "enhancing" the brand's value through its franchisees.

Warren Buffett is a huge fan of management teams that own their successes and their failures. Domino's success really kicked off in the early 2010s with its mea culpa advertising campaign. The company hasn't been afraid to admit past mistakes (i.e., that its pizza was subpar) and has successfully built rapport with consumers through its honest marketing.

The Oracle of Omaha is also attracted to companies with shareholder-friendly capital-return programs. Domino's has increased its base annual payout for more than a decade and has repurchased its shares in all but a handful of quarters. A majority of Berkshire Hathaway's holdings are time-tested dividend payers.

Although it's hard to argue against Domino's stellar return, a forward P/E ratio of 27 isn't exactly cheap. It'll be interesting to see if the Oracle of Omaha and his team build on this position in the quarters to come.