Did Buffett sell all his Apple to buy obscure stocks? The Motley Fool analysts interpret the stock god's new $4 billion investment layout.

The Motley Fool analysts have observed that Warren Buffett's recent buying and selling behavior is unusual. The billionaire has dumped key holdings worth $122 billion while spending $4 billion to buy some unpopular stocks. Buffett has always favored companies with wide moats but also likes to Buy the Dips on obscure stocks, adhering to his investment philosophy of being fearful when others are greedy and being greedy when others are fearful. Buffett's investment moves over the past few years have often drawn analysts' attention, as many large stocks have seen their valuations soar amid investor optimism, but Buffett has been a seller. The Motley Fool noted that in the past 11 quarters, he has sold more stocks each quarter than he has bought. Below is Buffett's stock allocation, purely market analysis, not any investment advice.

Buffett's large-scale dumping of Apple stocks

During this period, Buffett's most notable dumping was of Apple (NASDAQ: AAPL), which once accounted for more than half of Berkshire's publicly traded stock portfolio. Buffett began to sell off Apple shares at the end of 2023, having sold nearly 70% of his holdings to date. Based on the weighted average stock price, these dumping actions have raised approximately $122 billion in cash. The actual selling price for each batch of shares remains unclear.

Possible Reasons for Buffett's Significant Reduction in Apple Holdings

Buffett's investment in Apple may be one of his most successful investments in history. He first bought Apple stock in 2016, at a time when the market lacked confidence in its growth potential, giving it an extremely low expected price-to-earnings ratio. This appeared to Buffett as a highly attractive opportunity. Since then, Apple's stock price has continued to soar, the company's revenue and operating profit have grown steadily, and it has returned hundreds of billions of dollars to shareholders through stock buybacks and dividends, significantly boosting earnings per share.

However, it is worth noting that a significant portion of Apple's stock price increase comes from the expansion of its price-to-earnings ratio, which currently stands at 32 times. Although the growth of its services business and strong free cash flow have supported earnings performance, this valuation is no longer considered cheap for value-focused investors.

In addition, analysts believe that Buffett's sale of Apple stock has another layer of consideration. Under the current tax law, Berkshire only needs to pay a capital gains tax of 21%, which is the lowest rate since the 1930s. Given the soaring U.S. government debt, Buffett is concerned that such a tax rate may be difficult to maintain in the long term.

After Berkshire sold Apple, most of the funds flowed into short-term government bonds, but Buffett also invested about $4 billion into the following two underperforming stocks.

UnitedHealth Insurance (NYSE: UNH)

In the last quarter, Buffett increased his holdings in UnitedHealth Group, with an estimated investment amount of about $1.5 billion. The health insurance industry to which the company belongs has not seen a significant rise in price-to-earnings ratio in recent years and faces many challenges, leading to a lack of confidence among investors. Similar to other health insurance companies, UnitedHealth's utilization of medical services and medical costs have risen simultaneously, putting dual pressure on profit performance. Last quarter, the net profit margin fell to 3.1%, down from 4.3% in the same period last year. In addition, the company's management earlier withdrew its financial forecast and lowered its full-year estimates, with the current expected EPS being $16, far lower than $27.66 in 2024.

In addition, UnitedHealth is facing judicial scrutiny, with the Medicare Advantage program under investigation. If the court ultimately rules that UnitedHealth is in violation, the company may have to refund billions of dollars in premiums and pay fines.

Nevertheless, analysts believe that Buffett may be optimistic about UnitedHealth's large network scale and cost advantages, which still maintain long-term competitiveness in the industry. As the population ages, managed healthcare services are likely to continue growing in the future, with UnitedHealth expected to be a major beneficiary.

Constellation Brands (NYSE: STZ

Berkshire's team has made another new investment in the beer industry. Since the fourth quarter of last year, Berkshire has invested approximately $2.6 billion to acquire the beer manufacturer Constellation Brands. The company holds the distribution rights for Mexico's top beer brands Modelo and Corona in the United States, positioning them as premium imported beer brands through nationwide marketing campaigns, dominating the imported beer market in the U.S.

However, the industry is facing multiple headwinds, including increasingly severe macroeconomic conditions and socio-political uncertainties, particularly among Hispanic consumers, who are a key demographic for the brand. Additionally, the younger generation is showing a declining interest in beer, preferring ready-to-drink cocktails and non-alcoholic beverages.

Despite the fact that the constellation brand has successfully responded to challenges in recent years through price increases and market share expansion, these trends have had a noticeable impact by 2025. In the last quarter, its beer sales fell by 7%, and management expects annual sales to decline by 2% to 4%. Overall, it is estimated that adjusted earnings per share will decline by about 17% this year.

In the long term, the strength of the brand and the stabilization of the economic environment are expected to allow zodiac brands to regain growth momentum. This is also one of the opportunities for increased holdings that Buffett sees as growth-oriented.

Currently, the stock price of Constellation Brands is still lower than Berkshire's entry price. In contrast, the stock price of UnitedHealth has been rising continuously since Berkshire disclosed its investment. For investors interested in referring to Buffett's US stock strategy, the price of Constellation Brands may be more accessible.

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