Warren Buffett, the legendary investor, has made a significant move by reducing his stake in Apple Inc. (NASDAQ:AAPL) and other stocks, generating a whopping $97 billion in gains for his company, Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK).

What Happened: Buffett, last week, disclosed that he continued to cut his position in Apple and other stocks in the third quarter, leading to a $97 billion gain for Berkshire Hathaway. This move has raised Berkshire's cash levels to an all-time high of $325 billion, accounting for 28% of its asset value.

Buffett's decision has left investors and analysts speculating about the reasons behind the sale. Some investors and analysts suggest that Buffett, a follower of renowned value investor Benjamin Graham, is sticking to his principles, citing Apple's relatively high price-to-earnings ratio compared to its potential earnings growth.

Others speculate that Buffett, who has often lauded Apple, might be preparing for his successor or anticipating a potential crisis, hence the need to accumulate cash. "It is such a strange thing to see... [and it] begs the question, 'Why is so much cash being built up?'" pondered Morningstar analyst Greggory Warren, reported the Financial Times.

Warren also pointed out that he didn't think Buffett was gearing up for a major acquisition, given his recent struggle to compete with other buyers. Moreover, Berkshire hasn't been providing capital to large US businesses like Intel that have been seeking tens of billions of dollars of capital to fund their operations.

Buffett has also reduced his buying of other stocks this year, acquiring equities worth just $5.8 billion through the end of September, a figure overshadowed by the $133.2 billion of stock sales Berkshire has carried out.

Jeff Muscatello, a research analyst at Berkshire investor Douglass Winthrop, suggested that the impending management transition could be a factor in Buffett's decision to cash out. "The nearing inevitable management transition makes it an opportune time to clear the decks for the next generation," he said.

Why It Matters: This move comes after Berkshire Hathaway reported a decline in third-quarter operating earnings, driven by weakness in the insurance underwriting segment. Approximately 70% of the aggregate fair value was concentrated in five companies as of September 2024.

An earlier report pointed out that Buffett's Berkshire Hathaway missed out on $23 billion in profits by significantly reducing its stake in Apple. This move puzzled investors, with some experts suggesting that Buffett prefers round numbers, so stopping at 400 million shares might not be a big deal. Others saw Buffett positioning Apple as a key, long-term investment, similar to how he views Coca-Cola.

Image via Shutterstock