At the end of the first quarter, major hedge funds released their 13F forms showing their buys, sells, and existing holdings. In the last quarter, someone at his conglomerate bought more shares of Apple, despite its being the largest position. At the same time, a short bet was made against Apple.
What conclusions can investors draw from who is right and who is wrong?
I was more surprised by the buy by Buffett.
In the first quarter, the company bought 3.8 million shares of Apple. It’s not much compared to the 891 million shares in total.
In the first quarter of 2022, Apple declined along with the market, but it still trades at a reasonable valuation of 24 times earnings, even though it is not cheap. It seems too high a valuation for the investor to be buying more shares The price of Apple stock is more than five times what it was when Warren Buffet first started buying it.
I think the buys could have been made by either Todd or Ted, who manage smaller portfolios. It’s possible that it’s an investment by one of the pension funds at a company that is wholly owned by Warren Buffett. In the documents, those purchases are also shown.
It was surprising how big the bet was, but it was not as surprising. In the first quarter, Burry bought put options with 206,000 shares of Apple. A put option gives the holder the right to sell a certain amount of shares at a certain price, but not the obligation to do so.
The shares underlying the options make up 17.9% of the long part of Burry’s portfolio. Although we don’t know the strike prices or time frames for Burry’s put options, the put purchase is a way of increasing leverage to his bearish bet. The put options would be worthless if Apple didn’t fall beneath a certain price. The underlying value of the shares was the largest position in Burry’s portfolio, so his bet against Apple was much more aggressive.
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Why short Apple compared to other tech companies?
It’s not clear if Apple was chosen for specific reasons or the fact that it’s the largest company in the index. Apple had held up better than software and electric vehicle stocks that had been shorted last year. Last year, Burry revealed a short bet against a tech stock. He bet that interest rates would rise and short Treasury bonds.
The market and financial assets, generally, were called the greatest speculative bubble of all time by Burry in June of last year. Highly valued growth stocks have been decimated as interest rates have risen sharply.
Since other high-priced speculative tech stocks have already crashed, it’s possible that Apple could be next. 13Fs don’t reveal short bets, so the Apple put option bet may not be Burry’s only bet. He may be shorting other stocks completely.
Burry isn’t against all tech but he does like other sectors better than Apple.
It’s pretty clear that he likes other sectors better now that he has increased his bet on Apple. In a big way, Berkshire increased its bets on oil stocks, and also bought some banks, seemingly betting on higher oil prices and interest rates.
It’s curious that Burry went long other technology stocks in the first quarter, most notably Alphabet, Meta Platforms, and Booking HOLDINGS. It appears as though this could be a bet on a shift away from buying electronic appliances like laptops and phones. On its recent earnings call, Alphabet mentioned that travel searches were strong. Meta Platforms became very cheap after it declined following its fourth-quarter report. The three tech stocks are cheaper than Apple on a forward price-to-earnings basis.
The data by YCharts is for AAPL PE Ratio.
The long-term plan on Apple should be retained by investors.
Two big investors taking opposite sides of a popular stock shouldn’t have an effect on how long-term investors view Apple. Even though Apple’s stock may be a tad overvalued at the moment, Warren Buffet won’t cut his ties with the company unless he thought its competitive advantages had waned.
Burry is a hedge fund manager. He sold off five of his six existing positions and bought 11 new ones in the last quarter. That is not a long-term investing philosophy.
It’s possible both could be right. Apple’s stock is down about 14 percent since the beginning of April, so it looks like Burry was correct in his prediction. It is1-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-6556 is1-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-65561-6556 Maybe not, but maybe.
Apple has said it will be affected by supply chain shortages in the next quarter. Its brand, sticky ecosystem, and cash-rich balance sheet make it a pretty solid stock. If you need the money in the near term, then you shouldn’t dump your Apple stock. Apple is still an excellent business, and it remains the largest position of the company.
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