Berkshire Shares Suffer Second Biggest Plunge In 7 Years

Previously we noted that while a variety of hedge funds, ETFs and central banks are getting slammed by today's 9% drop in AAPL shares, few have been as badly hit (even if they can more than afford it) as Warren Buffett, whose Berkshire Hathaway is looking to lose more than $3.8 billion on its AAPL position thanks to his holdings of 258 million shares of Apple stock which make him the third biggest shareholder after passive investors Vanguard and BlackRock.

Today's drop brings Berkshire's holdings to about $36 billion, and a $3.8 billion loss, and has also hammered Berkshire Hathaway's Class A stock which is down more than $15K today, or 4.93%, its biggest one day drop since the February 5 VIXtermination event. Ignoring that one-time drop which quickly reversed, one would have to go back to August 2011 when the US was downgraded, to find an even bigger drop.

That said, Buffett may be enjoying the drop: the billionaire first announced Berkshire was buying Apple in February 2017 despite his usual aversion to tech stocks and following his disastrous foray into tech investing with IBM. On Feb. 1, 2017, Apple's shares were around $129 so the Oracle of Omaha is likely still in the green on the first portion of stock he bought. But Berkshire added to that stake significantly the last two years and at far higher prices. In Q1 2018, Berkshire bought another 75 million shares of Apple, adding to an existing stake of 165.3 million shares Berkshire already owned at the end of 2017. He told CNBC at the time that he clearly likes Apple, and "we buy them to hold."

"We bought about 5 percent of the company. I'd love to own 100 percent of it. ... We like very much the economics of their activities. We like very much the management and the way they think," Buffett told CNBC's "Squawk Box."

In August, when he disclosed his latest purchase, Buffett said that "the iPhone is enormously underpriced” compared with the utility it offers. Of course, when you are the world's third richest man, everything is "enormously underpriced." 

In retrospect, the iPhone may have been enormously overpriced, and Apple stock is down 37% since Buffett's statement.

The irony is that, as Reuters reminded us this morning, Buffett has said he would love to see Apple Inc shares decline in price so he could buy more.

Apple’s warning on Wednesday about weak iPhone demand in the holiday quarter due to slower sales in China sent its stock down 7.5 percent during after-hours trading. Class B shares of Buffett’s Berkshire Hathaway Inc traded down 2 percent in the same session on Wall Street.

Buffett, the folksy Nebraska investor known more for buying railroads, energy firms and classic American corporate brands than for his acumen picking tech stocks, in recent years has lamented missing the boat on buying shares in U.S. technology giants, even as he admitted an earlier investment in IBM - which was really just frontrunning the company's massive stock buybacks which however fizzled several years ago - was not one of his best.

Shortly thereafter Buffett made Apple a centerpiece of his portfolio of other company’s stocks, touting his own use of the Cupertino, California-based company’s products and saying at his annual shareholders’ meeting in Omaha last May, “We would love to see Apple go down in price,” so he could buy more at a bargain.

With Apple's market cap tumbling from over $1.1 trillion to under $700 billion in exactly three months, and dropping behind both Amazon.com and Microsoft in value, Buffett has finally gotten his wish, even is Berkshire's shareholders may not exactly agree.