Over the weekend, the investment community was flooded with news of Berkshire Hathaway, a company owned by Warren Buffett, reducing its holdings in Apple. According to its Q2 2024 financial report, Berkshire Hathaway sold nearly half of its Apple shares, reducing its holdings from 790 million to approximately 400 million.
In fact, starting from the fourth quarter of 2023, Buffett has gradually reduced his holdings of Apple Inc., with this reduction being as high as about 49%. However, Apple remains Berkshire Hathaway's largest stock holding.
Affected by Buffett's reduction in holdings and external macroeconomic changes, the A-share consumer electronics sector and the Apple industry chain sector experienced significant declines on August 5th. As of the close, the Wind Consumer Electronics Manufacturing Index fell nearly 6%, while the Apple Index fell over 4%.
As a barometer of the investment industry, does Buffett's reduction in holdings of Apple mean that Apple's growth has peaked? The development of Apple will directly affect the direction of the Apple industry chain. Will the fundamentals of A-share industry chain companies change?
Is the growth of the US stock market at its peak?
According to a report submitted by Berkshire Hathaway, the company significantly reduced its holdings of Apple Inc. from 789 million shares in the first quarter to approximately 400 million shares in the second quarter, a decrease of nearly 50%. Berkshire currently holds approximately 2.6% of Apple's shares.
Berkshire Hathaway's reduction of its holdings in Apple is not a new phenomenon. In the fourth quarter of 2023, the company reduced its holdings of 10 million shares of Apple stock, valued at approximately $1.822 billion (approximately RMB 13.1 billion). Since the beginning of this year, its reduction of holdings is still ongoing. In the first quarter, it continued to reduce its holdings in Apple, with its shareholding ratio dropping from 49.3% to 40.3%. Buffett explained that the reason for reducing holdings was due to reasonable tax avoidance.
But the massive sell-off in the second quarter indicates that this is clearly not just a tax saving measure, and further raises concerns in the market about Apple's overvaluation, with panic even spreading to the A-share market.
On August 5th, Apple's stock on the Frankfurt Stock Exchange experienced a significant drop. At the same time, A-share Apple industry chain companies were affected, with Dongshan Precision falling by the limit down, Changying Precision, Industrial Fulian, and Lingyi Manufacturing falling by more than 8%, and Changdian Technology, Lixun Precision, and Lansi Technology falling by more than 7%.
From the perspective of Apple's situation, it is indeed facing multiple challenges from the market.
Recently, Apple announced its financial performance for the third quarter of 2024 (i.e. the second quarter of the calendar year), achieving a total revenue of 85.78 billion US dollars, a year-on-year increase of 5%; The net profit was 21.45 billion US dollars, a year-on-year increase of 7.9%. Despite the dual growth of revenue and profit, the flagship product iPhone revenue has continued to decline. In the second quarter, the iPhone business revenue was 39.296 billion US dollars, a year-on-year decrease of 0.94%; In addition, Apple's performance in the Chinese market fell short of expectations. In the second quarter, Apple's revenue in Greater China was $14.728 billion, a year-on-year decrease of 6.53%.
Overall, in recent years, Apple's performance growth has gradually slowed down to single digits, which has to some extent affected investors' expectations for its future development.
Buffett's continued reduction in holdings of US stocks is an important signal that the risk of peaking in the US stock market is increasing. Another signal is that US technology stocks have experienced significant fluctuations in recent times, especially some technology stocks that performed below expectations in their second quarter financial reports have experienced a sharp decline. Regarding Buffett's reduction in holdings of Apple, Yang Delong, Chief Economist of Qianhai Open Source Fund, said in an interview.
He also believes that Buffett's success is due to his ability to make significant reductions in holdings when market valuations are high, leaving enough cash reserves. While the market is still enjoying the bull market feast, he has quietly withdrawn, and it is a big withdrawal. This is a warning of risks for all of us, especially those who are chasing the US stock market. We must be careful
However, there are still investors who are optimistic about Apple. On August 4th, Dan Bin, Chairman of Dongfang Port, stated on Weibo that "even if Berkshire Hathaway reduces its holdings so much, the impact on the market and the company is not particularly significant. What is more important is the company's own operating situation and future prospects." He revealed that Apple accounts for about 10% of Dongfang Port's portfolio and did not follow Buffett's idea of reducing its holdings of Apple. He believes that in the era of artificial intelligence, Apple is one of the most beneficial companies.
Is Guolian worth investing in?
In recent years, the issue of Apple's growth has been a hot topic in the capital market. At the end of 2023 and the beginning of 2024, multiple foreign institutions intensively downgraded Apple's stock rating, mainly due to the decline in phone sales expectations. From the latest released third quarter performance, it seems to confirm the market's concerns.
Of course, Apple is also making every effort to "win over". At this year's WWDC conference, Apple launched its personalized intelligence system, Apple Intelligence, which sparked high expectations and appreciation from the market for its AI capabilities, leading to an epic upgrade of all Apple products and finally attracting the attention of investment institutions.
In June, there were also reports of Apple adding orders to the industry chain. According to reports, the addition of orders for Apple A18 and A18 Pro has resulted in a 12 million unit increase in iPhone 16 inventory, reaching 95-96 million units, which is a positive feedback for Apple's confidence in new phone sales. The iPhone 16 series is Apple's first iPhone product equipped with AI functionality, and is expected to attract more users to switch devices. The inventory of 95-96 million units also exceeds that of iPhone 15 by about 15%.
At that time, the news caused a collective surge in the Apple industry chain.
At present, with the changes in Apple's third quarter performance and Buffett's reduction of his holdings in Apple, how will these intertwined information affect the direction of A-share industry chain companies?
Beyond panic, we still need to return to fundamentals.
In fact, after Apple's financial report was released, many institutions still gave a positive evaluation of this transcript.
Goldman Sachs has released a research report stating that Apple's earnings per share in the last quarter exceeded expectations, driven by the steady growth of the iPhone. The group should be at a critical moment in the iPhone replacement cycle, and the bank has given it a "buy" rating with a target price of $275. Goldman Sachs stated that Apple's iPhone revenue during the period was $39.3 billion, higher than the market forecast of $38.6 billion. In addition, the revenue from iPad and Mac also exceeded expectations, reflecting the benefits of new product launches, and the group's newly launched iPad and Mac this quarter can support Apple Intelligence. For the fourth quarter, the group's revenue target is a 5% year-on-year growth, with a gross profit guidance ranging from 45.5% to 46.5%. The bank believes that there is strong demand for iPhones and revenue should record year-on-year growth.
In addition, domestic institutions such as CITIC Securities, Ping An Securities, Xingye Securities, and Shenwan Hongyuan all believe that Apple's third quarter performance exceeded expectations.
Looking back at the A-share Apple industry chain, from the perspective of Apple's supply chain strategy, there has been a recent shift. According to media reports, Apple has already transferred some of its production capacity back to its contract factories in mainland China this year, and major companies such as BYD and Lite On Precision have joined the iPhone 16 supply chain. In addition, an interesting news is that on July 24th, the Henan Provincial Government decided to support Foxconn in building a new business headquarters in Zhengzhou, with a construction area of about 700 hectares and a total investment of about 1 billion yuan. These are undoubtedly good changes for the A-share industry chain.
Entering the third quarter, the consumer electronics market has entered the traditional peak season, and the expectations of all parties in the industry chain for the second half of the year are gradually improving. CITIC Securities pointed out that with the landing of Apple's AI layout, the innovation cycle of consumer electronics and the recovery cycle of the global semiconductor industry are worth looking forward to. Guosen Securities pointed out that the recognition of the end side AI market has increased, and the consumer electronics industry chain has opened a new growth cycle. At this point, the focus is still on recommending the Apple industry chain, which has a leading proportion of mobile phone business.
From the performance of Apple's industrial chain companies in the first half of the year, the recovery momentum is gradually strengthening. In the first half of the year, Luxshare Precision is expected to achieve a net profit of approximately 5.23 billion yuan to 54.4 billion yuan, a year-on-year increase of 20.0% to 25.0%; Crystal Optoelectronics is expected to achieve a net profit of approximately 400 million to 450 million yuan, a year-on-year increase of 125.45% to 153.64%; Changying Precision turned losses around year-on-year; GoerTek expects to achieve a net profit of approximately 1.18 billion to 1.27 billion yuan, a year-on-year increase of 180.0% to 200.0%.