BUFFETT HOLDING RECORD CASH AND SELLS APPLE, HERE IS HOW MUCH CASH YOU SHOULD HOLD

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By Nigam Arora & Dr. Natasha Arora

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

Holding Cash

Please click here for a chart of Berkshire Hathaway stock (BRK.B).

Note the following:

  • The Morning Capsule 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 (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 (KO) and American Express (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?
    • Apple is the largest position in the 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.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
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Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta (META), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are neutral in Amazon (AMZN) and Alphabet (GOOG).

In the early trade, money flows are negative in AAPL

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** (To see the locked content, please take a 30 day free trial) stocks in the early trade.  Smart money is *** in the early trade.

Gold

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

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

Oil

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

As a full disclosure, there is a new signal to buy oil in ZYX Buy.

For longer-term, please see oil ratings.

Bitcoin

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

Markets

Our very, very short-term early stock market indicator is ***.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down, and bonds are ticking up.

The dollar is weaker.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

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Gold futures are at $2332, silver futures are at $27.51, and oil futures are at $78.73.

S&P 500 futures are trading at 5161 as of this writing.  S&P 500 futures resistance levels are 5210, 5256, and 5400: support levels are  5020, 4918, and 4852

DJIA futures are up 156 points.

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 holding *** in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of ***, and short term hedges of ***. 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.

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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.

 

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This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Picture of Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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