Warren Buffett Is Selling

Summary

The script discusses a significant stock market sell-off, with major indices like the Dow Jones, S&P 500, and NASDAQ experiencing substantial drops, attributed to recession fears, Japan's market turmoil, and Warren Buffett's substantial sale of his Apple shares. It delves into the 'Yen carry trade' impact, Buffett's investment strategy, and the implications of Berkshire Hathaway's increased cash reserves. The speaker shares their perspective on investing through market volatility, emphasizing value investing and long-term growth.

Takeaways

• 📉 The stock market experienced one of the worst sell-offs of the year, with major indices like the Dow Jones, S&P 500, and NASDAQ showing significant drops.
• 🔍 A heat map of the market shows a broad-based decline, with major leaders like Nvidia, Apple, Google, and Amazon all trading down.
• ⏳ Several factors contributed to the sell-off, including fears of an upcoming recession, Japan's market suffering its worst selloff since 1987, and the unwinding of the Yen carry trade.
• 🍎 Warren Buffett's Berkshire Hathaway sold half of its Apple stake, which is a significant move considering Apple's massive position in his portfolio.
• 💡 The sale of Apple shares by Buffett is particularly noteworthy as it represents a substantial change in strategy and could indicate a shift in market sentiment.
• 📊 The Yen carry trade's unwinding is causing significant market volatility, as investors who borrowed in Yen to invest elsewhere are now closing their positions due to the Yen's surge.
• 🌐 The US job market's weakness has global implications, affecting markets like Japan, which had its worst day since 1987, falling 12.4% in a single day.
• 📈 Despite the sell-off, the speaker remains optimistic about certain stocks, like Booking Holdings, which they believe are trading at a low valuation with strong fundamentals.
• 💼 Warren Buffett's investment philosophy is highlighted, emphasizing buying great companies at low valuations and selling when they become expensive, rather than following market trends.
• 💡 The speaker's own investment strategy is revealed, focusing on buying quality companies at dislocated prices and holding them long-term, regardless of short-term market fluctuations.
• 🚫 The importance of avoiding companies with deteriorating fundamentals is stressed, as these situations can lead to significant and prolonged stock price declines.

Q & A

What was the main topic discussed in the video script?

The main topic discussed in the video script was the significant stock market sell-off, its causes, and the implications of Warren Buffett selling half of his Apple stake.

What were the percentage drops in the Dow Jones, S&P 500, and NASDAQ during the sell-off mentioned in the script?

The Dow Jones was down 2.2%, the S&P 500 was down 2.54%, and the NASDAQ (referred to as QQQ) was down 2.6% during the sell-off.

What is the Yen carry trade and how did it impact the market according to the script?

The Yen carry trade is a strategy where investors borrow money in Japan, where interest rates are low, and invest it in countries with higher interest rates to earn the difference. The script mentions that a surge in the Yen and market volatility have forced many to unwind this trade, contributing to the market sell-off.

How much of his Apple stake did Warren Buffett sell according to the script?

Warren Buffett sold half of his Apple stake, which was a significant portion of his public portfolio.

What was Warren Buffett's cash balance after selling half of his Apple stake?

After selling half of his Apple stake, Warren Buffett's cash balance increased to $278 billion.

What are some of the reasons the script suggests for Warren Buffett selling his Apple shares?

The script suggests reasons such as Apple's high valuation with slower growth, increasing regulatory challenges, and the potential for multiple compression due to its high PE ratio.

What does the script imply about the relationship between Berkshire Hathaway's size and its cash holdings?

The script implies that as Berkshire Hathaway grows in size, its cash holdings also increase proportionally, which is consistent with the company's history.

What is the script's perspective on the recent market sell-off in relation to the overall performance of the year 2024?

The script suggests that the sell-off was a significant event after a stable and smooth 2024, reminding people of frequent sell-offs in the past and serving as the first major market downturn of the year.

What is the script's view on the potential impact of a recession on the stock market?

The script indicates that fears of a recession, triggered by weaker-than-expected job reports, can cause significant market sell-offs, as job market weakness is often seen as an indicator of an economic downturn.

What investment strategy does the script advocate for in response to market volatility?

The script advocates for an investment strategy that focuses on buying high-quality companies at dislocated prices and holding them long-term, allowing for compounding growth, rather than trying to predict or time market events.

What companies does the script mention as examples of those that the speaker continues to hold or buy during the market chaos?

The script mentions companies such as Booking Holdings, Costco, Texas Roadhouse, S&P Global, MasterCard, Moody's, Microsoft, and Apple as examples of the speaker's continued holdings or recent buys.

Outlines

00:00

📉 Stock Market Tumult: Worst Sell-Off of the Year

The video script opens with a discussion of a significant stock market downturn, highlighting the Dow Jones, S&P 500, and NASDAQ's substantial drops. The heat map indicates a market-wide negative performance, with major companies like Nvidia, Apple, Google, and Amazon experiencing notable declines. Factors contributing to the sell-off include recession fears, Japan's market crash since 1987, the unwinding of the Yen carry trade, and Warren Buffett's substantial sale of his Apple shares, increasing Berkshire Hathaway's cash reserves to a historic high. The video promises an exploration of these factors, Buffett's strategy, and the speaker's own investment moves amidst market chaos.

05:01

🌐 Global Market Impacts and the Yen Carry Trade

This paragraph delves into the repercussions of the US job market's weakness on global markets, particularly Japan's Nikkei index, which suffered its worst day since 1987. The Yen carry trade is explained as a significant factor in the market's volatility, with investors borrowing in Japan and investing elsewhere to exploit the interest rate differential. However, recent yen appreciation has led to a forced unwinding of these positions, causing market instability. The paragraph also discusses the risks of currency speculation and the impact of hedging costs on the market, leading to a vicious cycle of increased yen value and trade unwinding.

10:02

🍎 Warren Buffett's Strategic Apple Unwinding

The speaker provides an in-depth analysis of Warren Buffett's decision to sell half of his Apple shares, a move that has reduced Apple's weight in Berkshire Hathaway's portfolio from 40.8% to approximately 20%. The sale is contextualized by examining Apple's high valuation, regulatory challenges, and potential fallout from the DOJ's lawsuit against Google. The impact of Buffett's actions on market sentiment and the potential 'keyman risk' he poses to Apple are also discussed, alongside the speaker's own reasons for trimming their Apple position previously.

15:02

📈 Buffett's Investment Philosophy and Berkshire's Cash Holdings

This section examines Warren Buffett's investment philosophy, focusing on his preference for value and his adeptness at selling at the right time. It contrasts Buffett's successful Apple investment with Berkshire Hathaway's past missteps, such as the early sale of Costco. The speaker speculates on Buffett's future actions with the significant cash reserves now held by Berkshire, suggesting that he will wait for market distress to buy back in. The video also addresses the misconception that Berkshire's record cash holdings are unusual, explaining that the company's cash balance naturally grows with its overall size.

20:03

🛠 Buffett's Market Behavior and Investor Strategy

The speaker outlines Warren Buffett's contrarian investment approach, emphasizing buying during market distress and selling during periods of strength. It discusses Buffett's recent net selling activity, which contrasts with his historical net buying pattern, and suggests that Buffett is selling due to high market valuations rather than anticipating market events. The video encourages viewers to invest like Buffett by focusing on value and long-term holding, mentioning the speaker's own recent purchases of Booking Holdings despite market turmoil.

25:04

🏆 Investing Through Market Volatility

In the final paragraph, the speaker reflects on the importance of a robust investment strategy that can weather market volatility, including recessions. They express confidence in their portfolio's resilience, highlighting the growth of their holdings in earnings and free cash flow. The speaker also discusses the benefits of buying back shares and paying dividends during downturns, using Intel's decline as an example of a situation to avoid. The video concludes by urging viewers to reassess their investment strategies if recent market events have caused them distress.

Keywords

💡Stock Market Sell-off

A stock market sell-off refers to a rapid decline in stock prices, often across a broad market segment. In the video, the script mentions a significant sell-off with indices like the Dow Jones, S&P 500, and NASDAQ experiencing substantial drops, indicating a widespread concern among investors.

💡Dow Jones

The Dow Jones Industrial Average (DJIA) is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States. In the script, the Dow Jones is cited as being down by 2.2%, reflecting the severity of the market sell-off discussed.

💡S&P 500

The S&P 500 Index is a stock market index of 500 leading companies listed on stock exchanges in the U.S. and is considered a key indicator of the overall U.S. stock market. The script notes that the S&P 500 is down by 2.54%, emphasizing the broad impact of the sell-off.

💡NASDAQ

The NASDAQ, often stylized as QQQ, is a major stock exchange for technology and biotechnology companies, known for its tech-heavy index. The script mentions the NASDAQ down by 2.6%, highlighting the tech sector's vulnerability during the market downturn.

💡Recession

A recession is a period of negative economic growth that lasts for at least two consecutive quarters, indicating a significant slowdown in economic activity. The script suggests that fears of an upcoming recession are a primary concern for investors, contributing to the market sell-off.

💡Yen Carry Trade

The Yen carry trade is a strategy where investors borrow Japanese Yen at low-interest rates to invest in higher-yielding assets abroad. The script discusses the unwinding of this trade due to a surge in the Yen's value, causing significant market volatility.

💡Warren Buffett

Warren Buffett is a renowned investor and the chairman of Berkshire Hathaway, known for his value investing philosophy. The script highlights news of Buffett selling half of his Apple stake, which is a major event affecting investor sentiment and the market.

💡Berkshire Hathaway

Berkshire Hathaway is a multinational conglomerate holding company led by Warren Buffett, known for its focus on long-term investments in a diverse range of companies. The script mentions Berkshire's cash balance increasing to $278 billion after Buffett's sell-off, indicating a strategic move.

💡Apple Stake

In the context of the script, 'Apple stake' refers to the significant portion of Apple Inc. shares owned by Berkshire Hathaway. The sale of half of this stake by Buffett is a key point in the video, signaling a potential shift in market strategy.

💡Value Investing

Value investing is an investment strategy that involves buying stocks that appear to be trading for less than their intrinsic value. The script discusses Buffett's value investing approach, suggesting that his decision to sell Apple shares may be due to a perceived overvaluation.

💡Booking Holdings

Booking Holdings is a company that operates booking and reservation websites for travel and lodging. The script mentions the speaker buying Booking Holdings during the market chaos, illustrating a strategy of buying quality companies at dislocated prices.

Highlights

The Dow Jones, S&P 500, and NASDAQ experienced significant sell-offs, with drops of 2.2%, 2.54%, and 2.6% respectively.

The heat map indicates a broad market decline with major leaders like Nvidia, Apple, Google, and Amazon trading down significantly.

Concerns of an upcoming recession, influenced by Baron, are identified as the primary concern for investors.

Japan's Nikkei suffered its worst sell-off since 1987, dropping 12.4% in a day.

The Yen carry trade unwinding is impacting the market, with investors closing out positions as the Yen surges.

Warren Buffett sold half of his Apple stake, which accounted for over $150 billion and represented 50% of his public portfolio.

Buffett's cash balance increased to $278 billion, marking Berkshire Hathaway's highest cash holding ever.

Discussion on why Warren Buffett might be raising cash by selling Apple and Bank of America positions.

Investor reactions to market chaos, including the speaker's own portfolio adjustments and buying strategies.

The impact of a weak US jobs report on global markets, suggesting the potential start of a recession.

Analysis of the Yen carry trade, its significance, and the current market conditions leading to its unwinding.

Buffett's historical investment in Apple, his 5x return, and the valuation when he initially bought the stock.

Reasons for trimming Apple positions, including high valuation, slow growth, and regulatory challenges.

Buffett's investment philosophy of buying low and selling high, and its application to his Apple sale.

Berkshire Hathaway's record cash holdings in context with the company's growth, and Buffett's strategy with cash.

The speaker's investment approach during market sell-offs, focusing on buying quality companies at dislocated prices.

The importance of a long-term investment strategy that is resilient to market fluctuations and recessions.

The speaker's current buying activities, including a new position in Booking Holdings and its attractive valuation.

The portfolio's performance year-to-date, demonstrating resilience despite market downturns.

The final advice on investment strategy, emphasizing preparedness for market volatility and a focus on fundamentals.

Transcripts

welcome back everyone we have an

exciting day today we've had one of the

worst stock market sell-offs this year

right now the Dow Jones is down Min -

2.2% the S&P 500 is down

2.54% and the QQQ the NASDAQ is down

2.6% now these are Big Draw downs and

it's not even the worst of today it was

worse just a couple hours ago so we're

having a bit of a comeback but it's

still a really bad day if we look at the

map overall the heat map here shows

across the board we're deeply in the red

we have a lot of the big leaders like

Nvidia trading down 6% Apple down 4% we

have Google down 2% Amazon down 3% and

so on you look anywhere in the market

and most likely it's deeply in the red

and what is causing the sell-off today

well there's a couple different factors

there's talks of an upcoming recession

that's what Baron says is the primary

concern for investors today we also have

Japan's Market the Nick a is suffering

the worst selloff since 1987 and then we

have the Y Cary Trade unwinding now if

you're not familiar with the Yen carry

trade that makes you normal most people

aren't we'll be discussing what it is

and how it's impacting the market and

then finally perhaps the biggest news

and maybe the most rattling for the

markets is the news that came Sunday

that Warren Buffett sold half his Apple

steak half his Apple steak is massive

this wasn't a normal 5 to 10% position

this was 50% of his public portfolio he

had well over $150 billion of apple and

he sold half the stake it's bumped up

his cash balance to currently $278

billion this is the most cash that

Burkshire has ever had why did Warren

Buffett decide to dump half his Apple

position why is he raising so much cash

why did Burkshire recently just sell a

lot of their Bank of America position

they're doing a lot of sells and we're

going to get to the bottom of it and

then of course we're going to be looking

at my portfolio what I'm currently

buying during this Market chaos and much

more so we have a lot to get into let's

go ahead and jump in now we can first

start off by talking about the selloff

today after a stable 2024 a pretty

smooth sailing 2024 we finally got our

first taste of a big sell-off it

reminded us way back of the co era

remember then when we'd have sell-offs

like this quite frequently well this

gave us a little bit of that memory and

for a lot of people that's not a fun

experience seeing your stocks dive 10

15% in a single day is not fun seeing

the major indices down 4% in a day is

really not fun that's a lot of money if

you've bu built up your Investments over

a long period of time in many cases it

shows us that Investments take the

staircase up and the elevator down when

the stock market drops it drops very

quickly and quick drops in the market

cause Panic now behind this drop there's

a lot of different things there's a lot

of different factors the main one that

Barons says the biggest factor is

recession fairs this was caused by fears

that the US is at risk of recession

after Friday's week job reports

triggered Mayhem across Global markets

so there we have it we have a jobs

report come out that's a little bit

weaker than expected we have the FED

that has not lowered interest rates and

now there's many people speculating that

the weak jobs is the start of a

recession jobs are a lagging indicator

they show us when recession has already

started by the job market falling apart

once a lot of people lose their jobs

that is the single biggest indicator

that we're now in a recession so seeing

any indication of weakness in the job

market scares investors now this weak

job report in the US also had an impact

on Japan Japan's Nick which is like

their index their S&P 500 had its worst

day since 1987 falling

12.4% so we've fallen so far somewhere

around 2 to 4% imagine the market

falling 12.4% in a single day that's

what just happened in Japan over the

past month it's down over

25% you're seeing a decline in a quarter

of your wealth a quarter of your net

worth

in just a month this is an incredible

sell-off in Japan this is caused for two

primary reasons one of them is the US

job market being disappointing we don't

live in an isolated insular environment

where what goes on in the US doesn't

impact the rest of the world this is

global markets what happens in the US

impacts the rest of the world so if the

us is going into a recession the biggest

most powerful GDP country in the world

is headed into a recession it's going to

impact the rest of the world in a

negative manner and in many cases worse

than the impact on the US so this is

having a secondary impact on Japan and

the biggest problem is Japan also has

another Factor the Yen surged and this

is unwinding a trade called the Yen

carry trade the Yen carry trade is

pretty simple interest rates are really

low in places like Japan and they're

really high in places like Mexico so

investors are borrowing money from Japan

and investing it in places like Mexico

and earning the difference it is an

Arbitrage play this trade depends on

borrowing currencies remaining cheap and

Market volatility remaining low both of

those factors have turned against

investors in recent weeks as the Yen has

surged forcing them to close out of

their positions so all these investors

that have been doing this trade

borrowing money from Japan in this low

interest rate low volatility environment

and investing in places like Mexico are

finding that this trade is collapsing

and you're seeing them head for the

exits hedge funds and other speculative

investors were holding more than 180,000

contracts betting on weaker Yen on a net

basis worth more than $14 billion by

last week those positions have been cut

to around 6 billion so this trade is

halfway over so many people are heading

for the exits and the data shows that

it's not done yet we're going to see

further unwinding of the Y carry trade

now the big risk for Traders when

they're doing these type of Investments

where they're betting one currency

against another and earning the

difference between the two of course is

currency risk which which is volatility

and changes in the value of currency or

interest rates that risk is immense when

you're using a lot of options a lot of

Leverage now in most cases Traders know

about these risks and so they buy

insurance they buy hedging for it but in

this case this trade has been so popular

that the price of hedging has become

unaffordable so many of them just

decided you know what I'm going to go

without any type of hedging I'll go

without any type of insurance with so

many Traders not buying any insurance

for the past couple of years and now

there's a lot of volatility they're all

rushing to do so since they're all

rushing to hedge now it's creating a lot

of demand for the Yen increasing the

price and value of the Yen this creates

a vicious circle as more and more of

them are rushing to hedge their position

it increases the value of the Yen as the

Yen value increases more of them are

closed out of their positions which

further increases the value of the Yen

so you're seeing this circle of people

being closed out of this trade and the

Yen increasing in value we don't know

how long this is going to take to

completely unwind but it is in the

process of doing so so the Japanese

Market's currently a mess right now down

25% and 12% in a single day you have

this vicious cycle unwinding with these

leverage trades currently unwinding and

that's going to last some more time and

then you layer upon that the news that

the US has weak economic data all of

that is causing a lot of trouble in

Japan and some trouble in the US but

then of course I think the biggest news

out of all of this perhaps the biggest

symbolically

is Buffett Buffett the Oracle of Omaha

selling half of his Apple position he's

talked about this company as being the

greatest company in the world a pillar

of birkshire like it's one of the third

pillars of the company and here he is

chopping away at half his shares we had

the news come Sunday the Omaha base

conglomerate disclosed in its earnings

filing that its holding of the iPhone

maker was valued at $ 84.2 billion in

the second quarter suggesting that the

Oracle of Omaha offloaded a little more

than 49% of the tech stake even after

selling Apple it Remains the largest

stake by far for Berkshire so he sold

roughly half his Apple position but

Apple Still Remains the largest holding

in Berkshire by far now to put this in

perspective with the rest of his public

portfolio this is what it looks like the

second largest holding is Bank of

America which he's also been selling and

that was 12% of the portfolio and then

you had Apple at

40.8% now that is before this news so he

sold roughly half of this now Apple

makes up roughly 20% of the public

portfolio so it's still the biggest

position by about double but it is much

smaller than it was before before it was

41% now it's around 20% he is selling

down Apple now there's a lot of

takeaways from this news anytime Buffett

sells it's used for clicks and shock

value but I want to break down what this

cell actually means and the reason that

Buffett's doing it I want to put this

cell into context 4 months ago I made a

video of why I was trimming my Apple

position I was selling down the position

and I listed off the reasons why on the

Whiteboard the first one and this video

is available you can look it up right

now but the first one that I listed is

Apple trades at a relatively High

valuation of a 274 PE ratio and

expectations of growth of around 7 to

10% earnings per share growth in summary

apple is a expensive company trading at

a high multiple that's now growing

slowly now the second reason I listed

off is Apple's being piled on by

Regulators the EU is finding at $2

billion they're implementing new

regulations forcing Apple to open up

their App Store this is a weakening of

Apple's mode the more and more

Regulators tear down the apple ecosystem

the weaker the moat becomes now if we go

throughout this video I list off more

and more reasons of why I was triming my

Apple position another one was the doj

lawsuit against Google represents a

threat against Apple Google pays Apple a

lot of money to be defaulted if the doj

ends that relationship that would be an

immediate hit to Apple's bottom line so

we have the slow growth the high

valuation the challenges from constant

regulation and the lawsuit against

Google which could impact apple and then

finally I list the final reason I was

trimming Apple let's go ahead and just

play a clip from this video from four

months ago Warren Buffett is a massive

shareholder of Apple he's really

championed the company and I believe

that he does represent a little bit of

keyman risk in the story of Apple for

example last quarter Burkshire sold 1%

of its Apple stake and because Burkshire

sold 1% you saw story after story after

a story of Buffett selling Apple trying

to make investors fearful now the fact

that he only sold 1% wasn't great it

wasn't positive news he wasn't buying

more Apple um but it wasn't the worst

possible news if we got news that

Buffett trimmed his stake by 5 or

10% what would that do to the stock how

would investors react to that type news

this analyst argues that Buffett's

already up a ton on his stake in apple

which is true he was buying the company

in 2016 so he's made like five times as

money on Apple already it represents 50%

of his Equity portfolio and what would

happen if Buffett started to sell which

he could do because the valuation

potential issues with it Buffett could

start to trim the holding a little bit

more he argues that the likely result if

Burkshire sells more shares would be

retail investors rushing for the exit

and Apple shares getting slaughtered so

I had a list of concerns and the reasons

why I was trimming my Apple position

part of that being that Warren Buffett

may sell the stock and we see a bit of a

trade down if he does it's not

encouraging when one of the best

investors in the world is selling out of

his stake of a company and in this case

he didn't just sell five or 10% he sold

50% and I believe he's going to continue

selling I don't think Buffett's done and

the reason why is simple apple is a

stock that Warren Buffett bought back in

2016 if we look at the share price we go

way back to 2016

we have it right here apple is around

$23 per share 23 24 this is when Buffett

was really buying the company at the

time Apple traded at a 164 PE ratio at

the time Apple was a $600 billion market

cap company it grew dramatically from

$20 per share now up to $200 per share

while paying dividends the entire time

Buffett has made 5x's money on this

Investments it'll go down as one of the

best tech Investments from any investor

ever in history it is one of the most

significant best investments ever done

in Tech and Buffett did that with a huge

chunk of his portfolio he poured $35

billion into apple and then 5x that

invested Capital now again when he was

buying Apple the market cap was around

$500 to $600 billion now it's $ 3.34

trillion the PE ratio of the company was

around 16 to around 17 depending on the

day he bought now the PE Ratio is 30 the

earnings per share of the company have

gone up dramatically but the valuation

of apple has doubled since Buffett

bought the position and Buffett is a

value investor he likes getting good

value for what he's buying he likes it

when he buys a company cheap and the

multiples go up and it becomes more

expensive when Buffett was buying apple

back in 2016 many people talked about

the company being a weak company it was

just a hardware company they didn't

really have any significant software

built out but Apple soon became a

massive software company I followed

along with this Buy in 2018 and Apple

has gone up three times since when I

initially purchased it this was one of

the best buys to follow Buffett into but

Buffett's not only good at buying he's

also really really good at selling many

investors sell companies at the wrong

time you have investors like Terry Smith

that sold Estee Lauder too late that

sold PayPal too late that sold Amazon

too early and into it too early he has

trouble with his cells Buffett on the

other hand is Pretty good overall with

cells he likes to buy companies cheap

and sell them expensive now he's not

perfect there's some cases where Buffett

has sold at the wrong time one company

that Burkshire sold at the wrong time

was Costco Burkshire sold Costco in

around 2020 so right around here

Burkshire hathway sold Costco and that

was a really bad time to sell Costco

Costco's up over double the returns of

Berkshire haway since they sold the

position

so Costco is an example of Buffett

getting the cell wrong this is a company

he should have held on to in hindsight

in the case of Apple only time will tell

if this is another Costco that he should

have held on to or another great sell

from Buffett where he sold it at a good

time given the risk and reward if I was

to guess right now I believe this is

going to be a good sell and I say that

holding a little bit of Apple myself the

reason being is that it's simply

undeniable that apple is trading at a

higher valuation with lower growth the

combination of being higher valued with

lower growth means that there's far more

downside for Apple than upside the

chance of multiple compression is far

greater than the chance of multiple

expansion Buffett likes to find

companies that have lots of catalysts

earnings growth free cashlo growth and

low valuations he likes to get a lot for

what he's paying for with Apple at $210

per share it's difficult to see that

there's going to be any type of multiple

expansion how are multiples going to

expand it already trades at a 304 PE

ratio is it going to go to a 40 or a 50

it might but you can't really count on

that it's more than likely going to go

down a little bit to a 25 or

23 as the growth slows the PE Ratio

should follow and we seen this happen

with other highquality companies in the

past ones like Estee Lauder or Nike

those companies were considered

compounding machines but when they get

too expensive the multiples can compress

now no matter what metric you look at if

you compare the price of Apple today the

valuation of the company compared to

when he was buying it in 2016 he was

getting much better value in 2016 and I

think that Apple's unlikely to have the

same returns it's had over the past 10

years now of course with Buffett selling

half of his Apple position this raises

another question what is he going to do

with all this money half his Apple

position was $80 billion this brought

the total cash balance of Berkshire to

an incredible

$277 billion this is the most money that

Berkshire has ever held the most cash

they've ever had this is over A4

trillion dollar in cash it's really an

incredible amount of money now of course

anytime Buffett does some big sells and

he has a lot of cash that raises some

eyebrows why is Buffett the best

investor in the world holding so much

cash something that's helpful to do is

anytime you look at the amount of cash

that Burkshire has you have to put that

in context with how big Burkshire is it

makes sense for Berkshire to hold more

cash as the company itself becomes

bigger if we plot out the tangible Book

value of Burkshire against the cash

balance they currently hold it paints a

far clearer picture you can see that

Burkshire is continually gaining in the

amount of cash they hold as the company

overall grows the Blue Line the top one

is a tangible Book value and Burkshire

grows this year-over-year quite

consistently you can see the tangible

Book value just continuing to go up now

you also see the cash balance going up

with the tangible Book value and they go

up almost in parallel there is some

zigging and zagging there's some times

where they do some buys and the cash

balance will go down in proportion of

the book value but overall you see

consistency here as Burkshire grows as a

company they also grow their cash

balance and this is why the headline the

burkers is holding a record amount of

cash is a bit misleading they're always

holding a record amount of cash in 2022

they're holding a record amount of cash

in 2018 they're holding a record amount

of cash the same thing with 2016 and

2014 and 2008 and 2005 as a company

grows over overall they grow the amount

of cash they hold and this is consistent

with their history so the headlines of

the record cash that Burkshire holds is

a little bit less scary when you put it

in context the thing that concerns me

more than the record cache they hold

something that I actually look at that

does raise some eyebrows is this chart

right here berkshire's net purchases or

sales over time this goes back to 2017

and it shows how much they bought or

sold every single quarter the red of

course is when Berkshire is selling the

green is when they're buying and this

Nets out their sales and buys what you

can see is that over time from 2017 to

2022 birkshire was a buyer they're

buying shares of companies in net over

those three or four years then you get

to December of 2022 and all of a sudden

they start selling from December of 2022

to June of 2024 they are a net seller

every single quarter that's seven

quarters of consecutive net selling from

Berkshire why is Buffett selling right

now quarter over quarter without doing

any buys well Buffett himself will tell

you that he does not sell based on

anticipation of Market events so he's

not selling because of what's going on

in Japan he's not selling because he's

predicting a recession he's not selling

because of the jobs report that's not

the reason that Buffett sells the reason

that he sells is multiples have gone up

growth has slown and he does not see

good value with his companies he sees

better values just holding it in

treasuries that's the reason that he's

cashing out of these positions Buffett

will be a buyer when free cash all

yields go up when when PE ratios go down

that's when he'll start to buy stocks

again he is a value investor he buys low

he sells High stocks right now are

rather expensive even with today's scary

sell-off of 2 to 3% both the S&P 500 and

the QQQ are in the green by around 10%

the stock market's doing great

valuations are high most people have

been greedy over the past year pushing

prices up and up Buffett does not follow

the trends he doesn't follow the herd as

people are buying the market pushing

prices up and up he sells out when

everyone finally capitulates and starts

to sell out of their positions when they

start to give up on great companies that

are earning money Buffett will be a

buyer so if you want to invest like

Buffett you do not play the game of

predicting recessions or economic events

you buy and sell based off of value he

bought Apple during a time period where

it was cheap value he's now selling it

during a time period where it's

expensive and everyone else wants to buy

it he buys during times of distress when

people are scared and anxious selling

out of their positions he sells into

strength when people are happy when

they're making money when valuations are

pushed up to extremes Buffett doesn't

follow Trends he doesn't just push

prices up higher and higher he buys

great companies at low valuations and

holds them long term he's held Apple

since 2016 and this sell of Apple which

I believe will continue I think will be

one of the best trades ever done in

history and I think it's going to be one

of Buffett's best trades that he's ever

done with this track record the size of

this trade the profitability of it the

timing of buying it when nobody else

wanted it and selling it during a time

where there's so much talk of AI and

everyone wants to buy Apple is just

incredible and it shows how good he is

of an investor he's had other misses

he's had smaller Bets with different

companies that he's missed on but those

pale in comparison to the size and scale

of this apple investment it really is

remarkable if we want to invest like

buffit we want to buy great companies

when they come at discounted prices when

for some reason the market doesn't like

these companies and they're at low

valuations in my portfolio that's the

goal it's to buy high quality companies

at dislocated prices and hold them

longterm and allow them to compound now

today I have been doing a series of buys

I have been buying booking holding

booking holding is a new position to the

portfolio I'm just buying into it and

I've increased my stake dramatically

over the past month as it sold down

booking is selling down because of these

General fairs of the market it's going

down a lot even though the fundamentals

are incredible it trades at a low

valuation an 184d PE ratio a 6% free

cash flow yield these are really healthy

numbers and the company has incredible

fundamentals their gross bookings is at

an all-time high growing year-over-year

room Knight sold continues to go up

quarter over quarter even the most

recent quarter this year there's more

room nights sold than last year the

company is super high margin super

profitable look at the free cash flow

growth over time on a free cash flow per

share basis they grew by 25%

year-over-year

this is faster than Visa or Mastercard

or S&P Global or many other companies I

hold so I have a company that's growing

incredibly fast trading at a low

valuation and of course if there is any

trouble with the company if it continues

to sell down because of fars of an

upcoming recession they'll just continue

to buy back their shares which is

something they've done aggressively over

the past 10 years since 2014 the shares

have gone from 53 million down to 36

Million last year they bought back 7% of

their total Market so this company is a

buyback machine that pays a dividend at

the same time now if we go into

recession booking holding May trade down

but because of the high margins of this

business they'll be fine they'll be able

to buy back their shares aggressively

even in the case of a recession so I

don't fear going into recession even

with a travel company some people think

that's crazy but recessions only last

typically for a year one year of holding

a company you might have a down year and

in this case I see a great future and

great current value for the company so

that's what I've Curr ly been buying but

I also have been holding all of my

companies I hold my Costco shares I hold

my Texas Roadhouse shares I still hold

all of my S&P Global MasterCard into and

Moody's Microsoft and Apple and all of

these companies I'm not concerned about

a potential recession it just doesn't

worry me all of these companies will be

able to pull through in the story fund

it's giv back some of its gains this

year but still year-to date it's up

12.7% which beats out the S&P 500 and

the QQQ we're still up $48,000 in this

portfolio

even after Amazon has been hammered

today down 5 or 6% so even though these

companies are trading down a little bit

it doesn't concern me at all

intrinsically they're growing day by day

quarter over quarter Amazon's going to

be worth a lot more in the next three

years than they are today overall what

I'm looking for are companies that will

steadily grow their cash flows quarter

over quarter year-over-year I like

companies that have earnings growth and

free cash flow per share growth and even

if the price comes down as long as

they're growing in their cash flows and

earnings I feel fine about it it just

means that it's a temporary dip it means

that eventually it'll recover if not

they can do BuyBacks and dividends and

grow their earnings even faster when the

fundamentals are going up and the price

is going down that is the best situation

to be a buyer that's the best situation

to be an investor the issues you should

avoid as an investor are when the

fundamentals go down when the earnings

and cash flows go down that's a

situation like Intel Intel's having

fundamental damage to the company it's

down over 50% this year it's not coming

back quickly this is the situation I try

to avoid is when the actual fundamentals

of the company are tanking I don't have

any company in my portfolio where that's

the case every single position I hold is

growing in its free cash flow growing in

its earnings per share so if prices come

down that's fine with me I'm going to be

a buyer so as far as I'm concerned

nothing changes with news like this even

if we go into recession that should be

something that's already planned in

terms of your investment strategy and if

this does cause a lot of grief if you're

genuinely concerned about the past

couple of days then I think that may be

a a message that you need to rethink

your investment strategy and maybe

rethink your portfolio because you

should be well prepared for these type

of instances It's Not Unusual at all for

stocks to drop dramatically in a couple

of days and you should be prepared for

that that's all for this episode see you

in the next one