Here’s what Warren Buffett’s doing as the stock market whipsaws

Each quarter, legendary investor Warren Buffett has to report what he has been buying and selling. This is via a 13F filing in the US as part of his ownership of Berkshire Hathaway (NYSE:BRK.B). However, he also has to report more immediate filings if the action’s on a stock he owns a 10% (or higher) stake in. Therefore, I can see what he’s recently been up to.

Recent actions

Over the past couple of weeks, Berkshire Hathaway has filed with share sales in Apple and Bank of America. Both are large holdings in his portfolio, hence why we get the disclosure now versus having to wait for a while.

Apple was by far the largest holding, accounting for around 40% of the entire pot. However, a filing from late last week showed that Buffett sold around 390m Apple shares. This equates to roughly half his holding in the company.

As for Bank of America, Buffett sold just under 53m shares in the last two weeks of July. This was previously his second largest holding after Apple. The reduction is smaller though, accounting for around 5% of his holding in the bank.

Cash on hand

It appears that Buffett was able to sell his shares just before stock markets around the world took a sharp move lower. Although it’s too early to say if we’ve finished the downward spiral, Buffett will certainly be happy to have trimmed some of his holdings and banked some profit.

From the latest quarterly earnings, Berkshire Hathaway’s sitting on a whopping cash pile of $277bn, partly due to the sale of stocks. This gives the management team (including Buffett) plenty of dry powder to take advantage of any further stock market drops.

This should aid the share price to outperform, both now and in the future. Investors will be aware of the recent actions, so will know that the overall losses from the investment portfolio will be minimised. This could see some buying Berkshire Hathaway shares as a defensive option.

Going forward, as soon as Buffett gets a sniff of some cheap stocks trading at a low valuations, he’ll likely snap them up in big amounts. Should he be correct in his long-term view, he’ll be able to bank more profit. This will filter down to the bottom line for Berkshire too, again acting to support the stock. Over the past year, the share price has risen by 18%.

Keeping a close eye on things

A risk for both Buffett and the share price is if this turns into a full blown stock market crash. Even though he has reduced his exposure, the investment portfolio would still take a hefty hit if the market really tumbled. This could spook some investors and cause them to sell their Berkshire Hathaway stock and hold cash instead.

I’ll be closely watching any other reports of Buffett’s actions in the coming weeks. As I often mention, I don’t simply copy everything that he does. But it gives me a really good finger on the pulse of the actions of one of the smartest players in the game.