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Over the weekend, the investment circle was flooded with news that Berkshire Hathaway, owned by "stock god" Buffett, reduced its holdings in Apple. Its second quarter 2024 financial report showed that Berkshire Hathaway sold nearly half of its Apple shares, from 790 million shares originally held to about 400 million shares.

In fact, Buffett has been reducing his holdings of Apple shares since the fourth quarter of 2023, and this time the reduction is as high as about 49%. However, Apple is still Berkshire's largest stock holding.

Affected by Buffett's reduction of holdings and external macroeconomic changes, the A-share consumer electronics sector and Apple industry chain sector fell sharply on August 5. By the close of trading, the Wind Consumer Electronics OEM Index fell by nearly 6%, and the Apple Index fell by more than 4%.

As a weathervane of the investment community, does Buffett's reduction of Apple's holdings mean that Apple's growth has peaked? Apple's development will directly affect the direction of the entire Apple industry chain. Have the fundamentals of A-share industry chain companies changed?

Has the growth potential of US stocks peaked?

According to the report submitted by Berkshire Hathaway, the company reduced its holdings of Apple shares in the second quarter from 789 million shares in the first quarter to about 400 million shares, a decrease of nearly 50%. Berkshire Hathaway currently holds about 2.6% of Apple's shares.

Berkshire's reduction of its holdings in Apple is not new. In the fourth quarter of 2023, the company reduced its holdings of 10 million Apple shares, worth about US$1.822 billion (about RMB 13.1 billion). This year, its reduction is still ongoing. In the first quarter, it continued to reduce its holdings of Apple shares, and its shareholding ratio dropped from 49.3% to 40.3%. As for the reason for the reduction, Buffett explained that it was for the reason of reasonable tax avoidance.

But the huge sell-off in the second quarter showed that this was clearly more than just a tax-saving measure, and it further triggered market concerns about Apple's overvaluation, and the panic even spread to the A-share market.

On August 5, Apple's stocks listed in Frankfurt plummeted. At the same time, A-share Apple industry chain companies were affected, Dongshan Precision hit the limit, Changying Precision, Foxconn Industrial Internet, and Lingyi Manufacturing fell by more than 8%, and Changdian Technology, Luxshare Precision, and Lens Technology fell by more than 7%.

Judging from Apple’s situation, it is indeed facing multiple challenges from the market.

Recently, Apple announced its third quarter results for 2024 (i.e., the second quarter of the natural year), showing total revenue of $85.78 billion, a year-on-year increase of 5%; net profit of $21.45 billion, a year-on-year increase of 7.9%. Despite the growth in both revenue and profit, the revenue of the flagship product iPhone continued to decline. In the second quarter, the iPhone business revenue was $39.296 billion, a year-on-year decrease of 0.94%. In addition, Apple's performance in the Chinese market was lower than expected. In the second quarter, Apple's revenue in Greater China was $14.728 billion, a year-on-year decrease of 6.53%.

Overall, in recent years, Apple's performance growth has gradually slowed down to single digits, which has to some extent affected investors' expectations for its future development.

"Buffett's continued reduction of U.S. stock holdings is an important signal that the risk of the U.S. stock market peaking is increasing. Another signal is that U.S. technology stocks have experienced sharp fluctuations in recent times, especially some technology stocks whose second-quarter financial reports performed below expectations, which once plummeted." Regarding Buffett's reduction of Apple holdings, Qianhai Kaiyuan Fund chief economist Yang Delun said in an interview.

He also believes that Buffett's success is due to his ability to sell off a large number of shares when the market valuation is high, leaving enough cash reserves. "When the market is still enjoying the bull market feast, he has quietly withdrawn, and it is a large-scale withdrawal. This is a risk warning for all of us, especially those who chase U.S. stocks must be careful."

However, there are still many investors who are optimistic about Apple. On August 4, Dan Bin, chairman of Oriental Harbor Investment, said on Weibo, "Even if Berkshire Hathaway reduces its holdings by so much, the impact on the market and the company is not particularly large. What is more important is the business performance and future prospects of the company itself." He revealed that Apple accounts for about 10% of Oriental Harbor Investment's holdings, and he did not follow Buffett's idea of ​​reducing Apple's holdings. He believes that in the era of artificial intelligence, Apple is one of the companies that will benefit the most.

Is the Apple supply chain worth investing in?

In recent years, Apple's growth has been hotly debated in the capital market. At the end of 2023 and the beginning of 2024, many foreign institutions intensively downgraded Apple's stock ratings, mainly due to the expected decline in iPhone sales. And judging from its latest third-quarter results, it seems to confirm the market's concerns.

Of course, Apple is also trying hard to "save face". At this year's WWDC conference, Apple launched the personalized intelligent system Apple Intelligence, which aroused the market's high expectations and praise for its AI functions, and brought an epic upgrade to Apple's entire product line, finally attracting the optimism of investment institutions.

As recently as June, the industry chain also reported that Apple had increased its orders. Reports show that Apple A18 and A18 pro orders were increased, and the iPhone 16 inventory was revised up by 12 million units to 95 million to 96 million units, which is a positive feedback for Apple's confidence in the sales of new phones. The iPhone 16 series is Apple's first iPhone product equipped with AI functions, and it is expected to attract more users to change phones. The inventory of 95 million to 96 million units also exceeds that of iPhone 15 by about 15%.

At that time, the news caused a collective surge in the Apple industry chain.

At present, Apple’s third-quarter performance has changed, and Buffett has reduced his holdings in Apple. How will these intertwined pieces of information affect the direction of A-share industry chain companies?

Beyond the panic, we still need to return to fundamentals.

In fact, after Apple’s financial report came out, a number of institutions gave positive comments on the report.

Goldman Sachs published a research report pointing out that driven by the steady performance of the iPhone, Apple's earnings per share growth last quarter was better than expected. The group should be at a critical moment in the iPhone replacement cycle, and the bank gave it a "buy" rating with a target price of US$275. Goldman Sachs said that Apple's iPhone revenue in the third fiscal quarter was nearly US$39.3 billion, higher than the market forecast of US$38.6 billion. In addition, iPad and Mac revenue also exceeded expectations, reflecting the benefits of new product launches, and the group's new iPads and Macs launched this quarter can support Apple Intelligence. For the fourth fiscal quarter, the group's revenue target is a year-on-year increase of 5%, and the gross profit guidance is between 45.5% and 46.5%. The bank believes that iPhone demand is strong and revenue should record year-on-year growth.

In addition, domestic institutions such as CICC, Ping An Securities, Industrial Securities, and Shenwan Hongyuan Securities all believe that Apple's third-quarter performance exceeded expectations.

Looking back at the A-share Apple industry chain, from the perspective of Apple's supply chain strategy, there has been a recent shift. Media reports show that this year Apple has transferred part of its production capacity back to mainland China's foundries, and major manufacturers such as BYD and Luxshare Precision have joined the iPhone 16 supply chain. In addition, an interesting piece of news is that on July 24, the Henan Provincial Government decided to support Foxconn in building a new business headquarters in Zhengzhou, with a construction area of ​​about 700 acres and a total investment of about 1 billion yuan. These are undoubtedly good changes for the A-share industry chain.

Entering the third quarter, the consumer electronics market has entered its traditional peak season, and the expectations of all parties in the industry chain for the second half of the year have gradually improved. CICC pointed out that with the implementation of Apple's AI layout, the consumer electronics innovation cycle and the global semiconductor industry recovery cycle are worth looking forward to. Guosen Securities pointed out that the market recognition of end-side AI has increased, and the consumer electronics industry chain has entered a new growth cycle. At this point in time, it is still recommended to focus on the Apple industry chain with a leading share of mobile phone business.

Judging from the performance of Apple industry chain companies in the first half of the year, the recovery momentum is gradually strengthening. In the first half of the year, Luxshare Precision expects to achieve a net profit of about 5.23 billion yuan to 5.44 billion yuan, a year-on-year increase of 20.0% to 25.0%; Crystal Optech expects to achieve a net profit of about 400 million yuan to 450 million yuan, a year-on-year increase of 125.45% to 153.64%; Changying Precision turned a profit year-on-year; Goertek expects to achieve a net profit of about 1.18 billion yuan to 1.27 billion yuan, a year-on-year increase of 180.0% to 200.0%.