Buffett’s Apple Stock Sell-Off
Warren Buffett, the legendary investor overseeing Berkshire Hathaway (NYSE: BRK.A, BRK.B), has significantly reduced his firm’s position in Apple (NASDAQ: AAPL) over the past year. Once accounting for 50% of Berkshire’s massive portfolio, Apple now represents just 26% after Buffett sold 605 million shares in 2024.
The breakdown of Apple sales by quarter:
- Q1 2024: 116 million shares
- Q2 2024: 389 million shares
- Q3 2024: 100 million shares
Apple remains a strong company, but Buffett’s move raises questions about its future growth potential. Despite the company’s reputation, challenges such as declining market share in China and regulatory scrutiny over its $20 billion annual revenue from Google search agreements could weigh on its long-term growth.
Apple’s Mixed Financial Performance
Apple’s latest earnings report for Q1 FY2025 reflected both strengths and weaknesses. Revenue grew 4% to $124 billion, yet iPhone sales struggled, failing to meet expectations despite the introduction of Apple Intelligence, a new AI-driven software initiative.
While Apple’s earnings per share (EPS) increased 10% to $2.40, much of the stock’s recent gains stem from multiple expansion rather than earnings growth. With a price-to-earnings (P/E) ratio of 33, the stock appears overvalued compared to Wall Street’s forecast of 10% annual earnings growth through fiscal 2026.
For investors, this means caution. Those who hold large Apple positions may consider trimming their stakes, while prospective buyers might want to wait for a more attractive entry point.
Berkshire Bets on Domino’s Pizza
Amidst its Apple sell-off, Berkshire Hathaway initiated a small position in Domino’s Pizza (NASDAQ: DPZ) during Q3 2024. While Domino’s has delivered a staggering 3,400% return since its 2004 IPO, recent performance has been less impressive, with shares lagging the broader S&P 500.
Domino’s remains the world’s largest pizza chain by sales and store count, benefiting from its vertically integrated supply chain and strong brand loyalty. The company’s aggressive digital strategy—including revamped loyalty programs—has helped maintain market leadership, even as competitors like Pizza Hut and Papa John’s struggle.
Domino’s Growth Strategy and Valuation
Despite its competitive edge, Domino’s reported mixed results in its most recent quarter:
- Revenue: Grew 5% year-over-year to $1 billion
- Same-store sales: Increased in both domestic and international markets
- Net income: Remained flat at $4.19 per share due to higher tax rates
Looking forward, Domino’s targets annual sales growth of 7%+ and operating income growth of 8%+ through 2028 under its “Hungry for More” strategy. However, analysts project a more conservative 6% EPS growth through 2025.
While Domino’s remains a strong business, its stock trades at a relatively high 29x earnings. Investors may find better value by waiting for a lower entry point.
Final Thoughts
Buffett’s moves suggest a cautious approach to high-growth tech stocks and a renewed interest in consumer staples. While Apple continues to dominate its industry, concerns over valuation and slowing growth prompted Berkshire’s divestment. Meanwhile, Domino’s Pizza, despite its strong market position, also seems expensive at current levels.
For long-term investors, these developments highlight the importance of valuation discipline and adaptability, especially as market conditions shift.
