Warren Buffett and The Big Short’s Michael Burry: Why are they selling Apple and buying gold?
Warren Buffett and Michael Burry, portrayed by Christian Bale in the movie The Big Short, have been selling Apple and buying gold this year amid the wider equity market rally.
The holdings were revealed in their respective funds’ 13-F filings, which have to be lodged with the US Securities and Exchange Commission (SEC) 45 trading days after the end of each calendar quarter. Any fund with more than $100m (£79m) in assets under management has to file a 13-F, detailing positions in any US-listed equities.
The releases revealed key changes that the American investors had made to their portfolio, including that Warren Buffett’s Berkshire Hathaway had secretly made a $6.7bn (£5.3bn) investment in global insurer Chubb, taking a 6.4 per cent stake in the company.
Warren Buffett’s new investment
Berkshire had been acquiring Chubb shares since 2023 but had kept it quiet for the last three quarters with the approval of regulators.
Now, Chubb is the ninth biggest holding for Berkshire Hathaway, and when the news was revealed this week, Chubb shares shot up by almost six per cent.
Chubb made headlines in March after the company underwrote a $92m (£72m) appeal bond for former president Donald Trump in his defamation lawsuit.
The move makes sense for Buffett, as Berkshire Hathaway already owns insurance companies Geico, National Indemnity and General Re, and it’s an industry Warren Buffett knows incredibly well.
Berkshire sells Apple
Meanwhile, the Oracle of Omaha trimmed his investment in Apple by 13 per cent last quarter and completely sold his investment in Paramount Global. Overall, he sold a total of almost $20bn (£15.8bn) in equities from Berkshire Hathaway’s portfolio.
In contrast, he only added $3bn (£2.4bn) in equities during the period
The reason is twofold: First, Berkshire Hathaway is too big.
The firm has a market capitalisation of around $877bn (£693bn), meaning that as Sanford DeLand fund managers Eric Burns and David Beggs said, “the law of large numbers means there are fewer and fewer deals of sufficient size to move the dial”.
Apple is still the largest holding in Warren Buffett’s portfolio, at around 40 per cent, and the billionaire said it was “extremely likely” that it would remain the largest position.
However, the second reason for selling off is taxes.
“We are paying a 21 per cent federal rate on the gains we’re taking on Apple, and that rate was 35 per cent not that long ago, and it’s been 52 per cent in the past,” he said at the Berkshire Hathaway shareholder meeting.
“I would say with the present fiscal policies, I think that something has to give, and I think that higher taxes are quite likely.”
Therefore, it makes sense to take the tax hit on selling Apple now rather than when capital gains taxes are hiked in the future.
“There was later a pointed reference to too much media focus being on monetary policy relative to fiscal policy which remains loose in the US,” added Burns and Beggs at the shareholder meeting.
Michael Burry shifts to China and buys gold
Meanwhile, Michael Burry moved in a different direction: Towards China.
The hedge fund manager made famous in Michael Lewis’ The Big Short now runs money through his Scion Asset Management fund and doubled down on his Chinese holdings throughout the quarter.
Burry, who famously shorted mortgage securities in the run up to the Global Financial Crisis, had upped his stake in JD.com by 80 per cent, while buying 50,000 new shares in Alibaba. The companies are the fund’s top two holdings.
The manager also sold off his stakes in Amazon and Alphabet, owner of Google, as well as MGM Resorts, Oracle and Warner Bros, while buying shares in a physical gold exchange traded fund, likely to shore up a defensive position.