What’s going on?

• Berkshire Hathaway (Warren Buffett’s investment firm) was revealed to have sold off some of its Apple stock and quietly bought into three other companies.

What does that mean?

• Berkshire Hathaway was selling off some of its stake in Apple, holding on to “just” $120b worth; it also recently sold stakes in JPMorgan Chase and Wells Fargo too.
• It then instead bought into telecom giant Verizon, insurance broker Marsh & McLennan, and bruised oil major Chevron.

Why should I care?

For markets: A bellwether comes clear

• Berkshire Hathaway is a global bellwether for investors, so it might not be surprising that Verizon, Marsh & McLennan, and Chevron’s shares initially rose, while Apple, JPMorgan, and Wells Fargo’s fell at the revelation, with investor sentiment turning “very negative” on the three stocks Berkshire sold.

A bellwether stock is perceived an indicator of the direction of the market overall (either a sector or an economy

The bigger picture: The importance of portfolio rebalancing

• This reveals a lesson of the importance of rebalancing your portfolio too:
  • banks have done well in the last few months,
  • Apple has tripled its value since 2019).

By selling those stocks, Buffett’s business locked in some profits and made sure no industry or company shakes its portfolio too much.

Content source: Finimize (2021) The Usual Suspect. Available at: https://www.finimize.com/wp/news/the-usual-suspect/ [Accessed on February 22, 2021]