Stock God Buffett is gradually divesting Berkshire Hathaway's investment in Apple Inc. This is the most profitable investment in Buffett's investment history, accumulating a large amount of cash for Berkshire Hathaway. However, it is currently unclear whether the Stock God will use this fund for large-scale acquisitions.

Last Saturday, Berkshire released its financial report showing that the company continued to reduce its holdings of Apple and other stocks in the third quarter, bringing the company $97 billion in profit.

By realizing this profit, Buffett has raised Berkshire's cash level to an unprecedented level. Now, $325 billion in cash accounts for 28% of Berkshire's asset value, the highest level since at least 1990.

This situation has led Buffet's followers to speculate on the motives behind this sale. Some investors and analysts believe that Buffett adheres to the principles he learned under the guidance of legendary value investor Benjamin Graham, pointing out that Apple's PE is relatively high and does not match its potential profit growth.

Preparing for a handover?

This week, Apple warned investors that the company's future products may never reach the profit levels of the iPhone, as the company is investing in AI to compete with rivals including Google's parent company, Alphabet.

Others believe that Buffett's praise for Apple in recent years and the lack of other investment opportunities suggest he may have other intentions. Buffett has repeatedly mentioned the lack of good investment opportunities. Some speculate that Buffett is creating funding conditions for his successor, or he foresees some crisis and therefore has reason to increase cash reserves.

Morningstar analyst Greggory Warren told the media, "This is a very strange phenomenon... This also raises a question, why accumulate so much cash?"

Warren stated that, considering the difficulties Buffett faced in competition with other buyers, he does not believe Buffett is preparing for a large-scale acquisition. In addition, Berkshire has not provided capital to large U.S. companies like Intel seeking hundreds of billions of dollars in funding.

Furthermore, this year Buffett's purchases of other stocks have also been limited. By the end of September, he had only purchased $5.8 billion worth of stocks. In contrast, Berkshire has sold $133.2 billion worth of stocks.

Some analysts believe that these sales have reduced Berkshire's stock risk and provided ample liquidity for future investments, which has been effective in past stressful periods. However, some investors believe there may be other reasons behind this change.

Berkshire investor Douglass Winthrop's research analyst Jeff Muscatello told the media that simply valuation issues are unlikely to be the "sole reason" for Buffett cashing out. "The upcoming management transition makes it an excellent time to clear funds for the next generation," he pointed out.

Morningstar's Warren agrees with this view, stating that this is cash that Buffett's potential successor Greg Abel may deploy.

"Buffett has become more cautious in discussing Berkshire and its future. He knows he may not stay there for too long and doesn't want the successor to bear thorny issues that need solving."

"He hopes Greg has as much cash reserve as possible for use."

Analysts: Holding cash when the stock price is high is the style of the stock god.

Berkshire Hathaway has always maintained a large cash reserve, partly to meet the liquidity needs in its investment portfolio to pay for future claims from its massive insurance business.

Berkshire's investment in Apple began in 2016, when the company bought fewer than 10 million shares of stock, worth $1.1 billion. As Berkshire has always avoided fast-growing technology companies, this purchase surprised the market. Buffett even told shareholders in 2012 that he 'did not want to buy' Apple stock even if its profitability improved.

According to sources familiar with the matter, this initial investment was made by Buffett's deputy Ted Weschler. Over the following months, Buffett himself gradually appreciated Apple's business model, being impressed by the frequency and loyalty of customers using the iPhone.

Subsequently, Buffett followed Weschler in his own purchasing actions, along with a small fund operated by a Berkshire subsidiary, Berkshire held a total of 5.9% of Apple's shares. Last year, its position reached a peak value of nearly $178 billion. According to quarterly disclosure data analyzed by the media, Berkshire's Apple investment cost approximately $39 billion.

Some analysts believe that Apple's current stock price is no longer as cheap as when Buffett bought it. Buffett has previously stated that he believes short-term US Treasury yields are more attractive than 'optional investments in the stock market.' Bill Stone, Chief Investment Officer of Glenview Trust, pointed out to the media, 'Stock prices, including Apple and Bank of America, have not become cheaper since then. It may be that simple.'

According to FactSet's data, Apple's P/E ratio is 30 times. Darren Pollock, fund manager at investment group Cheviot and a Berkshire shareholder, told the media that when Buffett bought Apple, the P/E ratio of Apple's stock was only about 12 to 13 times, and 'Apple's growth rate was much faster at that time.'

Pollock added:

When the stock valuation is too high, Berkshire's cash will increase because Buffett finds fewer buying opportunities. Seizing the trading opportunities of short-term market fluctuations is not his style, selling Apple and holding a large amount of cash in an overvalued market is typical Buffett style.

Investors will have to wait another three months to confirm his plans. Berkshire told the media that Buffett will share his views in the annual letter in February.