Was Warren Buffett’s Big Sale of Apple Shares a Bet That Kamala Harris Will Beat Donald Trump?

The great story with Berkshire HathawayThe second quarter update was that Warren Buffett reduced his company’s stake Apple (NASDAQ:AAPL). At the end of 2023, Berkshire owned more than 905 million shares of the iPhone maker, worth more than $174 billion. Today, he owns 400 million Apple shares worth about $90.7 billion.

Many investors may still be scratching their heads as to why Buffett sold so much of Berkshire’s position in Apple. There is one theory, however, that we can safely put to rest. Was Buffett’s big sale of Apple a bet that Kamala Harris would beat Donald Trump? Not.

Vice President Kamala Harris delivers remarks at the 40th annual Black History Month virtual celebration hosted by Congressman Steny Hoyer of Maryland, Saturday, Feb. 27, 2021, in the South Court Auditorium of the Eisenhower Executive Office Building at the White House . (Official White House Photo by Lawrence Jackson).

An easy answer

At Berkshire Hathaway’s annual shareholder meeting in May, Buffett spoke about Berkshire’s sales of Apple stock in the first quarter. He suggested the fees were part of the motivation behind the sale. Speaking about paying taxes, the legendary investor said:

I don’t mind writing that check at all, and I’d really hope that with all that America has done for all of you, you shouldn’t mind that we do. And if they do it at 21% this year and we do it a little bit higher later, I don’t think you’ll mind that we sold Apple a little bit this year.

Vice President Harris wants to raise the corporate tax rate from 21% to 28%. Did Buffett’s sale of Apple stock reflect this proposal from the Harris campaign? Not at all.

President Joe Biden did not drop out of the race for the Democratic presidential nomination until July 21, 2024, after the end of the second quarter. Harris also did not announce his plan to raise corporate tax rates until August. Buffett has already finalized Apple’s Q1 and Q2 sales prior to each development. Even the presidential debate that led to pressure on Biden to end his pursuit of the 2024 nomination didn’t take place until June 27, and Buffett likely already made most of his sales of Apple stock in Q2 by then.

Sure, Buffett’s nickname is “The Oracle of Omaha.” Even his oracular powers, however, would not have been able to predict the wild turn of events we have seen over the past six weeks on the US political front.

Buffett’s bet on higher taxes

However, Buffett may have believed that Biden would beat Trump and was worried about raising taxes if that happened. Most polls have been close between the two men in the first half of the year. Biden’s proposed fiscal year 2025 budget called for corporate tax rates to rise to 28 percent — the same level Harris later proposed.

Whatever Buffett’s views on the 2024 presidential race, he clearly anticipates that US corporate tax rates will rise in the future. Why? He’s an expert in analyzing financial statements, and the US government’s financial statements don’t look very good.

The US has not had a budget surplus since 2001. Its deficit in fiscal year 2023 was $1.7 trillion. The national debt totals over $35 trillion. Buffett probably looks at these numbers and knows that taxes — including corporate taxes — will almost certainly go up at some point.

Why Buffett May Regret Selling Apple

And yet I still think Buffett might regret selling so much of Berkshire’s stake in Apple. The timing of his big sale may not have been the best.

Apple is about to release its first generative AI functionality. Some Wall Street analysts believe this will ignite an iPhone upgrade supercycle as consumers trade in their old iPhones for new ones that support genAI features. If they’re right, Apple stock could deliver impressive gains over the next few years — regardless of who wins the presidency in November.