No. of Recommendations: 2
I appreciate Mr Buffett's discussions of non-controlled businesses (common stock holdings) in recent letters, as well as his focus in those letters on Berkshire Hathaway's defensive nature. He's described his satisfaction with individual stock holdings which account for relatively minor portions of BRK's book value (~5%), particularly if those businesses are good enough to maintain (or improve) that proportion as time passes. And he's clearly interested in avoiding permanent loss of capital, whether due to overpaying for the stake or erosion of the business moat possessed by the investee.
Taken together, I view the recent Apple sales as a measure to reduce exposure to an increasingly expensive stock market. This holding had come to represent something like a third of Berkshire's book value, whereas it's now been reduced to the vicinity of 14%. All of Mr Buffett's comments indicate that he loves Apple's business and its management, and is perhaps comfortable with that level of concentration. I would not be surprised if he has completed his "right-sizing" of this position. There seems to be only a minor chance of permanent loss of capital from a purchase cost standpoint, as I am guessing the remaining 400 million shares have a cost basis of around $12 billion.
On the other hand, Bank of America sales may well proceed during the third quarter (at the right price). It seems to that BAC really stepped in the "pile of poo" by purchasing mass quantities of government securities having durations up to ten years(just my impression, but they seem to be running off pretty slowly) back in the days of very low interest rates, and now finds itself with a third of its capital "impaired" by today's higher rates (I doubt they'll have to sell these "held-to-maturity" securities, but who knows?!). Meanwhile, Berkshire held 333 million BAC shares (acquired subsequent to the conversion of its wonderful warrant - 700 million shares at $7.15 each!), at a cost basis of nearly $29/share. I can see a desire to reduce the holding back to the 700 million level. At that level, and a guesstimated price of $40, BAC would be a smaller percentage of BRK book value than AmEx, which as another poster commented is clearly the better business.
