Buffett Cut Apple Stake to $84.2B; Writer Predicts Snowflake Exit Next, Citing Tax Strategy

Berkshire Hathaway's latest quarterly report put a number on something investors had been watching: at the end of the second quarter, the company's Apple stake was worth $84.2 billion. At the end of the first quarter, it had been worth about $135 billion. Warren Buffett, in other words, sold a large share of the iPhone maker's stock, and the filing made it public.

The writer of this Motley Fool opinion piece, Adam Spatacco, says he was not surprised. He disclosed that he holds positions in Apple, and the Motley Fool says it holds and recommends Apple, Berkshire Hathaway and Snowflake. His argument goes further than the sale itself: he believes Buffett is not finished.

There had been signs. Earlier this year Berkshire cut its Apple position by about 13%. At Berkshire's annual shareholder meeting, Buffett explained that he expected changes to the tax code. The idea, as the piece describes it, was to lock in gains now and avoid a higher tax bill if he turned out to be right. Spatacco calls that logic sensible, and he thinks another tax-driven move could follow.

His candidate is Snowflake. Berkshire's portfolio is dominated by steady, blue-chip names such as Coca-Cola and American Express, and it rarely buys high-growth companies outside its core industries. Snowflake was an exception. In 2020, Berkshire put roughly $730 million into the company's initial public offering. Snowflake sells software as a service, focused on big data analytics. It sits in the technology sector, which Buffett has generally avoided, and at the time of the IPO it was still burning cash, which cuts against his preference for companies with steady and growing cash flow.

Filings show Berkshire owns about 6.1 million Snowflake shares. Against the $730 million invested, Spatacco infers a cost basis of around $120 a share. This is his estimate, not a figure from Berkshire. With the stock trading near $116, he concludes Berkshire is sitting on a loss. He acknowledges the loss is small in the context of Berkshire's size, and that Snowflake's price is volatile and could rebound. But he notes heavy selling by investors for a while, particularly through 2024.

That is where the tax argument comes in. Selling at a loss could reduce Berkshire's capital gains tax, a strategy known as tax-loss harvesting. Spatacco pairs it with the gains Buffett has already realized by trimming Apple.

He also admits he cannot say for certain why Buffett sold more Apple. His suspicion is that Buffett wants more cash, given uncertainty around the presidential election, further hedging against possible tax changes, and a desire to reduce exposure to a shifting artificial intelligence narrative. Those same concerns, he writes, could weigh on Snowflake. Earlier this year its CEO departed suddenly, which stunned investors, and he says the company has made little progress in AI compared with many software peers.

Spatacco also questions whether Buffett has bought into the AI story at all, given that he is not known as a technology investor. His hunch is that he has not, and that leaving Snowflake would mean returning to his roots.

The Snowflake exit is a prediction, not a reported plan. Berkshire has said nothing about it. The next quarterly filings will show whether the position changes.