Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) has increased its stake in iPhone maker Apple (AAPL, Financial) while trimming its Walmart (WMT, Financial) holding.
The move clearly can be attributed to the changing fortunes of both these companies in the hands of Mr. Market. Walmart’s stock price has gone up by more than 16% since the start of the year while Apple’s has gone up by a mere 2% during the same period.
"Berkshire owned 15.23 million Apple shares worth $1.46 billion as of June 30, up from 9.81 million shares as of March 31, according to a regulatory filing from Buffett's Omaha, Nebraska-based conglomerate.
"The filing also said Berkshire cut its stake in Walmart Stores Inc., the world's largest retailer, by 27% to about 40.23 million shares from 55.24 million. Walmart has been in Berkshire's portfolio for more than a decade."Â – Reuters
Buffett has shunned investing in technology companies for a long time, and we still don’t know if the trigger to invest in tech companies like Apple and IBM (IBM, Financial) came from Buffett or his portfolio managers, Todd Combs and Ted Weschler.
“Asked why he had bought IBMÂ shares rather than Apple or Google at Berkshire Hathaway’s 2012 shareholder meeting, Buffett said: 'The chances of being way wrong in IBM are probably less, at least for us, than the chances of being way wrong in Google or Apple ... I just don’t know how to value them.'” – Guardian
More than the increasing investments in Apple and IBM, the steadily shrinking Walmart holding does raise a lot of questions because he has scaled back his position by nearly one-third in one go despite signs that Walmart can buck downtrends in the general retail market.
Buffett has publicly praised Amazon (AMZN, Financial) CEO Jeff Bezos in the past and clearly has a lot of admiration for the ecommerce company. Though he is yet to invest in it, which he probably will do once Amazon’s valuation drops, it’s clear that Buffett thinks Walmart’s moat is not as strong as it used to be.
Amazon has been steadily expanding and deepening its reach within the U.S. while also going wide and deep, especially in potentially huge markets like India. U.S. operations have become more efficient, with margins steadily growing in the last few years. If Amazon starts becoming profitable overseas as well, it will give the company an enormous amount of room to undercut big-box retailers in the U.S.
Amazon Prime poses yet another threat to big-box retailers like Walmart. The hugely successful membership model offers free offerings that eventually lead to paid add-ons such as Amazon Prime Now one-day shipping upgrades.
Suffice it to say that the world of brick-and-mortar retail has been irrevocably disrupted, and Buffett losing interest in Walmart merely adds credence to the reality of an evolving retail market where Amazon sits at the top.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.
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