Buffett Holding Record Cash And Sells Apple, Here Is How Much Cash You Should Hold

Author: The Arora Report | May 06, 2024 01:06pm

To gain an edge, this is what you need to know today.

Holding Cash

Please click here for an enlarged chart of Berkshire Hathaway Inc Class B (NYSE: BRK-B).

Note the following:

• This article is about the big picture, not an individual stock. The chart of BRK.B stock is being used to illustrate the point.
• The chart shows Warren Buffett’s company BRK.B broke out at the beginning of the year with the rest of the market.
• The chart shows that BRK.B has been consolidating in the resistance zone
• Buffett has made two important disclosures.
  • Buffett is now holding a record amount of cash, $189B.
  • Buffett reduced his Apple Inc (NASDAQ:AAPL) position by 22% to $135.4B as of March 31, 2024. Buffett was holding $174.3B of AAPL stock at the end of 2023. Buffett appears to have sold about 115M shares or about 13% of his AAPL holdings.
• Buffett said, “Today things aren’t attractive.” How much cash should you hold? The Arora Report provides this guidance every day in the protection band. Please see the “Protection Band And What To Do Now” section below.
• Buffett also said, “We’d love to spend it, but we won’t spend it unless we think they’re doing something that has very little risk and can make us a lot of money.” This is, in part, also the secret behind The Arora Report’s success and popularity among individual investors, investment advisors, and money managers. The Arora Report teaches investors not to rush in and buy just because you have cash. It is to your own benefit to wait for dips in the buy zones and to also not buy when market conditions are not favorable.
• In The Arora Report analysis, Buffett chose not to do a major buyback of BRK.B stock because he knows that BRK.B stock, along with the rest of the stock market, is overvalued. 
• Prudent investors should note the following:
  • Buffett sold a large amount of AAPL stock at a time when he was already holding record cash.
  • Buffett sold AAPL stock in spite of Berkshire having to pay tax on a gain of $11.2B.
  • Even though Buffett sold AAPL stock, he called Apple a better business than Coca-Cola Co (NYSE:KO) and American Express Company (NYSE:AXP).
  • Buffett praised Tim Cook as a great manager.
  • Buffett says Apple is a great business and Tim Cook is a great manager, but he sold a lot of Apple stock when he did not need cash.
  • Prudent investors should pay attention to what Buffett did, not what he said. Think about it – if you were still holding a large amount of Apple stock, would you not say positive things about Apple to prop up AAPL stock?
  • As full disclosure, Apple is the largest position in The Arora Report's ZYX Buy Model Portfolio. Since the stock was bought at an average price of $4.68, there are large unrealized gains.
• Prudent investors are waiting for remarks by several Fed speakers that are ahead.
• The momo crowd is aggressively buying stocks in the early trade based on the weekend pump.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc Class C (NASDAQ:GOOG).

In the early trade, money flows are negative in AAPL

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV). 

Oil

The momo crowd is selling oil in the early trade. Smart money is buying oil in the early trade.

As a full disclosure, there is a new signal to buy oil in The Arora Report's ZYX Buy.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO: BTC) continues to see buying after Friday’s jobs report.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.

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