Warren Buffett Just Sold Almost 50% of His Apple Stock. Should I Sell Too?

Warren Buffett sold a lot Apple (NASDAQ: AAPL) stocks recently. Looking at Berkshire HathawayThe second-quarter earnings report shows the billionaire investor sold about 50% of his stake in the iPhone maker in the second quarter.

I own Apple stock and it’s one of my largest holdings. Should I follow the investment guru and sell the stock?

Buffett’s Trade with Apple

I’m not surprised that Buffett is selling Apple stock. That’s because the stock – which has been doing really well lately – has become huge position for him.

The 13F filings show that Buffett’s investment vehicle, Berkshire Hathaway, held about $135 billion worth of the tech giant’s stock at the end of the first quarter. That was nearly 50% of the portfolio.

Now, Buffett likes to place big bets on companies he’s bullish on. But having nearly 50% of his portfolio in one stock just isn’t prudent.

If Apple shares fell 20% or more (which they have in the past), his portfolio could take a huge hit. So the position became quite risky.

Even after the recent sale, Apple is still a big position for the stock legend. Berkshire’s second-quarter earnings report showed his position was worth about $84 billion at the end of June—about 30% of his portfolio.

So he continues to bet on the tech giant. It is still his biggest position by a large margin.

I don’t sell

As for my portfolio, I have no plans to sell Apple stock. It’s still a core position for me. Sure, the stock is a bit pricey after its recent rally. It’s currently trading at a price-to-earnings (P/E) ratio of around 33. That multiple seems a bit stretched to me, to be honest.

But I think Apple will be able to achieve this valuation in the near future.

One reason I say this is that the company is on the cusp of a major product refresh cycle. Once the company releases new AI-enabled iPhones, I expect consumers to rush to replace their old phones (which would boost revenue and profits).

Another reason is that the company buys back a lot of its own stock. It recently announced a $110 billion buyback, the largest in corporate history. Stock buybacks tend to boost earnings per share over time. And higher earnings per share lead to lower P/E.

Another advantage for Apple is that it may not have to spend as much money on AI as some other tech giants. That’s because it ends up offering a platform (the iPhone) that many other big tech companies offer (like Meta Platforms) will place their products where they are accessible to consumers.

Of course, Apple is under pressure to release a new iPhone that is truly impressive. If the next version is disappointing, the company’s revenue and profit growth could be slow, and we could see a weakening of the stock price.

I am optimistic, however, that the company will release a brilliant new product. After all, it has a great history of innovation.