In investing, Warren Buffett and Charlie Munger are household names, synonymous with success and financial wisdom. But even the best can sometimes have doubts, as evident during Berkshire Hathaway’s 2021 annual meeting.
Buffett, often regarded as one of the greatest investors of all time, made headlines when he decided to sell some of Berkshire Hathaway’s Apple shares despite them being described as Berkshire’s “fourth jewel” alongside their insurance operations, BNSF Railway and the Berkshire Hathaway Energy subsidiary Buffett chose to reduce their stake.
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This decision confused many people, including a shareholder from Switzerland who asked why Buffett would sell Apple shares if the company was so important to Berkshire’s portfolio.
Why Did Buffett Sell?
Buffett explained that Berkshire owns 5.3% of Apple, a stake that increased due to share buybacks by both Berkshire and Apple. This strategy allowed Berkshire to increase its company share without spending more money.
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He elaborated on Apple’s extraordinary business model, its massive fan base, and the “fantastic manager” at its helm, Tim Cook. Buffett praised Cook by saying, “He's handled that business so well ... he couldn't do what Steve Jobs obviously could do in terms of creation, but I don't think Steve Jobs could do what Tim Cook has done in many respects.”
However, despite all the praise for Apple, Buffett admitted to selling some shares, which he later regretted. In his words, “That was probably a mistake.”
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Charlie Munger's Input
Charlie’s way of pointing out mistakes is less dramatic but no less effective. According to Buffett, “Charlie, in his usual low-key way, let me know that [he] thought it was a mistake too.”
He continued talking to Munger on stage, “I could only do so many things that I can get away with Charlie. I used them up between Costco and Apple ... and suddenly, he probably very likely was right in both circumstances.”