Warren Buffett Dumps Apple and Bank of America to Pile Into This High-Yield Investment

Core Insights - Warren Buffett is retiring at the end of this year after leading Berkshire Hathaway since 1965, during which he transformed it into a trillion-dollar company [1] - Berkshire Hathaway has reduced its stakes in Apple and Bank of America, which were historically among its largest holdings [2][3] Investment Strategy - As of the end of Q3, Berkshire Hathaway holds over 238 million Apple shares (21.4% of its portfolio) and over 568 million Bank of America shares (9.6% of its portfolio), both significantly reduced from historical levels [3] - The reduction in Apple shares is attributed to its high valuation, with a forward P/E ratio of approximately 33.5, which is considered expensive given modest projected earnings growth [4] - Bank of America's valuation has also increased since Berkshire began purchasing shares in 2020, and the bank faces a more competitive environment [5] Tax Considerations - The current favorable corporate tax rate may incentivize Berkshire Hathaway to realize gains from its investments before potential tax changes occur [6] Cash Management - Despite selling shares, Berkshire Hathaway is primarily investing in U.S. Treasury bills (T-bills), holding $320.5 billion in T-bills at the end of Q3, which is more than the combined market capitalization of CVS Health, Altria, and Starbucks [7][8] - The T-bills yield around 3.9%, generating approximately $12.5 billion annually for Berkshire Hathaway [9] - Buffett emphasizes the importance of liquidity, preferring not to tie up large amounts in long-term T-bills, allowing for quick access to cash for future opportunities [11] Future Leadership - The strategy of holding cash and T-bills positions the incoming CEO, Greg Abel, with ample capital to work with after Buffett's retirement [12]