Could Apple Soon Lose Its Top Position in Warren Buffett's Portfolio?

Key Points

• Apple remains the biggest position in Berkshire's portfolio.

• But Buffett likely wasn't the genius behind this massive bet.

• 10 stocks we like better than Apple ›

It's official. By the end of 2025, Warren Buffett will no longer be the CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Many investors are wondering what portfolio changes will be in store once Buffett departs and his lieutenants take full control over the business.

Right now, Apple (NASDAQ: AAPL) remains the largest position in Berkshire's portfolio. The position is currently worth around $63 billion. Clearly, Buffett is a fan. But could the position be trimmed, or even liquidated following his departure? The answer might surprise you.

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Buffett may not be the genius behind Berkshire's Apple investment

The most important thing to understand about Buffett's Apple bet is that Buffett may not be the one who initiated the investment in the first place. A couple decades ago, Buffett and his longtime investing partner Charlie Munger met Ted Weschler and Todd Combs. According to Buffett, they were "the only two guys we could find that read as much as we did." Both were eventually added to the Berkshire investment team.

In 2016, Berkshire officially initiated its Apple position with a $1 billion investment. Notably, Buffett has long avoided tech companies. He reportedly doesn't own a computer and had never used an iPhone until 2018 -- two years after the Apple position was initiated. Combs and Weschler, it turns out, were responsible for getting Apple into Berkshire's portfolio.

In a 2016 interview, Weschler explained their thinking. They didn't just like Apple's hardware offering. They also liked the company's pivot to software, creating an ecosystem that allowed all of its devices to seamlessly work together. "Once you are fully invested in the [Apple] App ecosystem and you have got your thousands of photographs up in the cloud and you are used to the keystrokes and functionality and where everything is, you become a sticky consumer," Weschler explained.

At roughly the same time, Combs was given a challenge by Buffett: Identify a stock in the S&P 500 with a price-to-earnings multiple less than 15 that could generate at least 7% annual earnings growth over the next five years. Combs ended up identifying Apple -- the same stock Weschler had fallen in love with.

Image source: Getty Images.

Will Apple stock rebound in 2025?

Berkshire likely won't ditch its Apple stake simply because Buffett is departing the firm. After all, it wasn't even Buffett who initiated the position. Combs and Weschler are expected to stay on with the firm for many years to come. But there's another problem: Over the past 12 months, Apple's value has fallen by roughly 10%. The rest of the market, meanwhile, has surged higher.

Could Berkshire ditch the stock due to the recent lack of performance? It seems that Berkshire has already been trimming its position. In 2024, Apple comprised as much as 50% of the firm's publicly traded portfolio. Today, it only comprises around 24%. This has brought the technology sector from an overweight position in Berkshire's portfolio to an underweight position.

After the dip, Apple stock now trades at 32 times trailing earnings. That's a premium for a business expected to grow earnings by just 6.5% this year. Based on this, we could see Berkshire continue to trim its position. But the changes will have more to do with valuation than recent performance or the departure of Buffett as CEO.

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.