Finimize - 🍏 Buffett's latest move

What’s going on here?

Warren Buffett’s pride and joy, Berkshire Hathaway, pared its Apple holdings by another 25% in the third quarter.

What does this mean?

When Buffett started to roughly trim its stake earlier this year, he sought to reassure investors that the iPhone maker was still the apple of his eye – and would remain Berkshire’s top holding. And he’s held true to that: his closely watched conglomerate now holds just $70 billion in Apple shares, down from $174 billion in January, but they still make up the biggest slice of Berkshire’s pie. Meanwhile, Buffett’s sitting on a record amount of cash – $325 billion – and contemplating what to do with it. With today’s high stock valuations a bit too sweet to meet his strict standards, he’s just not finding much to buy.

Why should I care?

For markets: Playing the tax game.

Holding cash is old hat for Berkshire, but the firm hasn’t paused its share buybacks since 2018 – until now. When a company makes that move, it’s typically because it considers the firm’s stock to be a bit pricey. So maybe Buffett is eyeing up Berkshire’s own stock just now, but hoping to pick it up at a better price. In the meantime, he’s watching the firm’s cash pile grow and its potential tax bill shrink – with capital gains taxes potentially rising. And it might be worth taking a page from Buffett’s playbook – if your investments aren’t in a tax-advantaged account, cashing in could be a smart move to sidestep a heftier bill.

For you personally: Don’t sweat the vote.

If you think you’re on edge because of the US election, remember: the markets hate uncertainty too. But, at least with stocks, the drama caused by a presidential vote tends to fade quickly, no matter who wins. And if you’ve got the stomach for short-term bumps and jumps, this week’s turbulence might throw up some solid buying opportunities.

What’s going on here?

Nvidia is lining up to replace Intel in the Dow Jones Industrial Average (DJIA), a change that highlights one’s rise and the other’s fall.

What does this mean?

The DJIA – the Dow, as Wall Street affectionately refers to its oldest index – is an elite group of 30 stocks. And every once in a while, the index shakes up which stocks make the cut. Stocks with big price tags aren’t usually included, because the Dow is a price-weighted index – too heavy a share price and a company would have too much sway on the index’s moves. That would’ve counted Nvidia out too, but its stock splits have brought its share price down a notch, allowing it to fit in among the rest of the crew. And Nvidia won’t be the only newcomer: Sherwin-Williams will also join the ranks, replacing Dow Chemical (no relation).

Why should I care?

Zooming in: The revolving door spins again.

You can think of the S&P 500 as a massive shopping mall of US stocks, with 500 of America's biggest companies under its roof. The Dow is more of an exclusive boutique, with just a few hand-selected shares. And though it may be nice to be included in the blue-chip club, companies don’t get much out of their membership. Plenty of big-money exchange-traded funds (ETFs) buy and track the S&P 500 and the Nasdaq, but very few bother with the little DJIA.

The bigger picture: Another win for Nvidia.

Indexes typically add stocks that have performed well and delete those that have faltered. And Nvidia fits that bill – its share price has gone to the moon on the AI rocket and it’s on the edge of replacing Apple as the biggest company in the world. Intel, by contrast, has seen a stunning fall from grace, missing out on the AI boom. So its going-away party at the Dow feels like a sad farewell.