Warren Buffett Sold 50% Of His Portfolio

If you look through the latest reporting data, you see that Warren Buffett sold 16 stocks last year. If you add all of these up, it accounts for 50% of his portfolio sold in a single year. Nowhere in the history of his career has Buffett sold this many stocks. Not before the Black Monday collapse in 1987, not before the 2000 dot com crash, not even before the 2007 financial crisis. In total, he sold $150 billion worth of stocks. To put that into perspective, his net sales in the past have never exceeded $25 billion in any calendar year. This now leaves him with more cash than all of his stocks combined. So what stocks did he sell, and more importantly, why did he sell so much? I've read every article I could on this subject, watched every interview to try and get an answer. Warren Buffett does not like selling stocks. If you study his philosophy, you see that his ideal way of investing is to buy stocks and just hold them forever. He's been critical on the idea of buying a stock only to sell it a few years later. He's said, We are just the opposite of those who hurry to sell and book profits when companies perform well, but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behaviour to cutting the flowers and watering the weeds. If that is his general philosophy, which it is, why is Warren Buffett now, not just selling stocks, but selling hundreds of billions of dollars of his portfolio? Well, there are certain conditions when Buffett says it is reasonable to sell. Watch this carefully and see if you can pick up the 4 reasons Buffett says on why he would sell a stock. If I lost confidence in the business or the management or it became dramatically over overpriced, and that doesn't happen very often. Those are the reasons why you sell something. Our inclination is not to sell things unless we get really discouraged, perhaps with the management, or we think the economic characteristics of the business change in a big way. I mean, and that happens. The first 20 years of investing for me or maybe more, my decision to sell almost always was based on the fact that I found something else I was dying to buy. I mean, I sold stocks at, you know, at three times earnings to buy stocks at two times earnings. Did you pick that up? The four reasons are, one, if he needs money for other things. Two, if he loses confidence in the management. Three, if he loses confidence in the business itself. And four, if the stock is overpriced. Keep these in mind as we now take a look at the stocks that he has sold. Which one of these four is the reason why? Let's keep it nice and simple. We'll go over the top five stocks that he sold. These make up 99% of the sales. The rest are dribs and drabs. His fifth largest sale was a company called Snowflake. In 2024, he sold 6.1 million shares worth of stock, about a billion dollars sold, worth 0.3% of the portfolio. Snowflake is a company that provides data storage, processing, and analytical services in the cloud. The company itself has actually been doing well, depending on how you look at it. They've grown their customers from 3,000 in 2021 to 10,600 today. This has meant their revenue has grown from $500 million to $2.8 billion. The only problem is this here, their profit. It's been consistently getting deeper into the negatives, and you can see why a company like Berkshire might not like it. Minus $500 million to minus $800 million. I'm surprised he bought it in the first place, to be honest. Berkshire's fourth largest sale was Chevron, a stock that was once Buffett's fifth largest He sold 7.4 million shares in 2024, a total value of $1.1 billion, accounting for 0.4% of the portfolio. Chevron is the oil and gas company, it's massive, it operates in over 180 countries, and has a presence in regions with abundant oil and gas reserves, the US, Canada, Saudi, Brazil, and Australia to name a few. As a company, it has features that are known to attract Warren Buffett. Historically, it's spit out a lot of free cash flow for its shareholders, $21 billion, $37 billion, $19 billion. It's almost like an annual treasury bond payment, except larger and less consistent too. Buffett began acquiring Chevron in late 2020, back when oil was dirt cheap, acquiring an initial stake of 48.5 million shares and an average price of $80. That was when the world shut down and people were panicking that oil and gas were not going to be useful in the future. Buffett took the longer view and it paid off, the stock did well. And even now, Chevron shareholders, I wouldn't panic too much. Although Berkshire has been selling snippets of the stock, it's more of a gradual decline in ownership, not necessarily huge selling. Moving on to the third largest sale, it was Liberty Series XM, at 0.8% of the portfolio. With this sale there is a little bit of a catch, because yeah he sold 100 million shares, $2 billion worth, at the same time he was selling, he was also buying the stock in 2024. So I really don't know what to make of this, maybe Warren Buffett was doing some easy arbitrage, making some quick profits, either that or he's just become a straight Djang trader. But these next two sales are the most important ones, and we do have a lot more information on the reasons why he's selling. Bank of America was his second largest sale, which was a bit of a shock to Berkshire's long time followers. The banking and finance industry have always been big plays in Buffett's portfolio, he's invested in this industry for decades. Way back in 1969 Buffett bought an entire bank, called Illinois National Bank. In 1987 they bought Solomon Brothers, Berkshire's largest ever in a single company. In the 90s he fully acquired Geico, in the 2000s he acquired a large stake in Wells Fargo, and in 2020 Berkshire held stakes in US Bank Corp, Wells Fargo, JPMorgan Chase and Bank of America. And then, how the turntables. He exited the JPMorgan position that year in 2020, he closed out the Wells Fargo stake in 2022, he sold his last share of US Bank at the start of 2023, and now he's even reduced the big position of Bank of America. He's sold 235,000 shares, with a share price of $46, that means it's worth $10.9 billion of sales, or 3.5% of his portfolio. In terms of the Bank of America position itself, it's 22% of the stock that he sold. The question is why? Did he need money for other things? Did he lose confidence in the management? Did he lose confidence in the business? Or did he think that the stock was overpriced? Watch this clip and see what you think. I didn't like the banking business as well as I did before, but I did sell banks that we'd owned for 25 or 30 years. I just think the system isn't set up quite right in terms of connecting punishment to culprits on something that's an important, it's incredibly important that your banking system run well in the country. It just isn't going to work unless you have a system that works and you don't want them to create periodic crises unnecessarily. We don't know where the shareholders of the big banks necessarily are heading. You don't know what has happened to the stickiness of deposits at all. It got changed by 2008, it's gotten changed by this, and that changes everything. So we're very cautious in a situation like that about ownership of banks. As we all know, a bank relies on their deposits. If no one deposits money into the bank, the bank has nothing to work with and you have no business. So if the depositors take their money out, game over. This is all relevant because, well, do you remember what happened not long ago? Remember the bank run with SVB when depositors tried to withdraw $42 billion in a single day, which the bank did not have, and eventually they went insolvent? And of course at this time it was not just one bank that had issues, it was a lot of banks that were affected, or were worried in the very least. Well, what happens if in the future something like this happens again? And what happens when it's a larger bank that's affected? It means that the depositors take their money out, the bank is left with no business, and the shareholders lose all of their money. This is what Warren Buffett is worried about and why he sold all of his bank shares. He has lost confidence in the banking industry from a business ownership perspective. For me, that is clear as day. And I wonder if it is the same reason why he sold his largest position too. His largest sale was a little stock that you may know. It's called Apple. He sold 605 million shares of Apple in 2024. That's $138 billion worth of the stock, or 44% of the portfolio. Why would he sell shares in this company that has performed so well for him in the past and made him so much money? A company that he traditionally speaks so highly of. Mark Zuckerberg gave an interview on the Joe Rogan experience, which may give us a clue why. If we look at the unit sales of the iPhone, Zuck is not wrong. iPhone sales have been pretty much stagnant since 2015, around that $230 million mark, and yeah, there's been a slight decline over the last few years. The iPhone is core to Apple's business. The lack of growth with these sales, you can say, is not ideal for the shareholders in the least. So you would think that with slowing growth, they'd probably sell for a price-to-earnings ratio that is quite low. And actually, because of the weird market that we're in, it's the opposite. For the past 15 years, the stock is getting more expensive on a PE basis. It used to sell for a PE ratio of 12 in 2012, and this was not too long after the end of the financial crisis, so obviously investors were more cautious back then. But right now, investors are ploughing money into stocks, especially the big cap companies. Apple sells for a PE ratio of 37, triple what it was back then. For a large company that is slowing down, it doesn't appear to be rational. But as we all know, Mr Market is never rational. So when Buffett addressed this same question at the Berkshire Hathaway annual meeting, with Tim Cook in the audience, he gave a different reason as to why he was selling. He said the key reason why he was selling was because of tax purposes. And yeah, I believe that that was part of a reason why he sold, but do you think that the core, underlying reason he sold was because of tax, or because the price is high, with a slowing business model? I'll let you all decide what you think. So if we add all of these sales together, it accounts for $153 billion worth of stock sold. If we compare that to his current portfolio, which has a value of $266 billion, that is 57% worth of sales. However, his previous portfolio was worth $410 billion, so if you compare that to his previous portfolio, it's only 36% of his portfolio sold. And then if you look at Dataroma, if you add all of their percentages up, it is 50.4% sold in 2024. Personally, I believe that this figure here is actually the best way of measuring it, because you need to compare it to his past portfolio, but either way, it's a lot of selling. It's the most aggressive selling behaviour in the company's history. Berkshire's net stock sales in the past have never exceeded $25 billion in any calendar year, yet alone $150 billion. The logical follow up to this is where is Buffett funneling all of this money into? Now to the sponsor of the video, without which it would be a lot harder to make my content. 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Thank you Storyblocks for sponsoring this video, you are a legendary company. One of Berkshire Hathaway's favourite stocks to plough money into is Berkshire Hathaway. Wait, how does that make sense? Well, it's right, you can buy stocks in your own company, and basically what happens here is that each shareholder just gets a greater percentage ownership in the company itself. Since 2018, Warren Buffett, as the head investor at Berkshire Hathaway, has always made the decision to buy back shares in his own company. For six years straight, he allocated $78 billion into stock buybacks, that sum makes Berkshire his favourite stock to buy in that period. But in the third quarter of 2024, he completely reversed courses. He did not buy a single share of Berkshire, he stopped buying back the stock. This can only mean one thing, he believes that even his own shares are too pricey, maybe not necessarily overvalued, but at the very least, not worth buying at the current price. So if even his own stock is not worth putting money into, where is all of this money going? Well, if we take a look at their quarterly statements, they have $32 billion in cash and cash equivalents, but most of the cash has been ploughed into short term investments into US treasury bills. $288 billion worth in this asset. So these things here are US treasury bills with maturities of 3 months or less. What's happening here is, you're loaning money to the US government for a short period of time, and in return, you get a small return on your investments. It's safe because it's backed by the American government who control the money supply. They won't not be able to pay you, because they can just print more money to pay you back. These investments here normally come under the category of cash, and this is where Buffett has chosen to safeguard his money. If we add the $32 billion plus $288 billion, that is $320 billion in cash right now. If we compare that to the year before, he had $162 billion. So he's doubled his cash position in a single year, and it wasn't exactly small to begin with. So why is Buffett playing this game so safe right now, taking money out of his favourite investment category, and putting it into something that he historically does not like? Sometimes when you need the answer for the present, you have to look to the past. If you've studied the life of Buffett, read his annual reports, you might remember that there was one period where he completely dissolved his investing partnership. We have to rewind 56 years to a very different time, but in a way very similar. By the late 60s, the stock market had become increasingly speculative. Growth stocks had staged a huge rally, with 50 of the top growth companies in cutting edge industries like tech and pharmaceuticals becoming so popular, they were called the Nifty 50. Remind you of anything? The Nifty 50 were considered sure things, with investors willing to pay as high as 50 times earnings to own the stocks, under the conviction that those innovative companies would keep growing at a fast pace forever. Remind you of anything? But Buffett, by 1969, found nothing of value to buy, so he dissolved his investing fund and moved his money to the sidelines. Remind you of anything? Buffett sent out a letter to his investors explaining that because of the highly speculative nature of the market, he could no longer find investments that he believed would provide the type of returns that he had been getting in the past. He had become disillusioned with the market's overvaluation and the challenges of finding overvalued stocks in that market. So what happened post 1969 once Buffett had dissolved the partnership? Well we saw 4 recessions, stock crashed from 860 points to 350 points, the Arab oil embargo crisis hit, inflation went to 12%, unemployment reached a post WW2 peak of 9%. Did Buffett have a crystal ball here? Was he a profit, but for stock markets? Or did he just have a strong understanding on stock valuations and market cycles? If we fast forward back to today, Buffett, he's not exactly dissolving his partnership, in fact, he will never dissolve Berkshire. What he is doing, is moving assets to cash and building the Noah's Ark of investment gunpowder. Is this an exact repetition of his actions from 1969? No, but are these actions rhyming with what he did back then? Yes, yes they are.