The Not-So-Secret Reason Both Apple and Berkshire Hathaway Stocks Declined Today – The Motley Fool

What happened

Thursday was not a fun day to own Apple (NASDAQ: AAPL) stock – especially if your name was Warren Buffett.

Roughly 24 hours ago, If you've probably heard of now, Apple issued a revenue warning for its fiscal first quarter of 2019. Apple sales advised that revenue for its December 2018 quarter will probably come in at no more than $ 84 billion, or 8% below previous promises. Apple stock sank after the market reopened and investors were able to trade on this news, ending the day down 10% in response.

But not only Apple stock suffered. Shares of Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) stock declined, too, closing the day down 5.6%, and 5.5%, respectively.

Apple stock got cored today ̵[ads1]1; and that was bad news for Berkshire Hathaway. Image: Getty Images

So what

Why should bad news for Apple get into bad news for Berkshire Hathaway stock?

Simply because of this: According to Berkshire Hathaway's latest 13-F filing, Apple stock is currently Berkshire's largest stock holding. Indeed, as of November, Apple shares made up of the stock that owned Berkshire Hathaway – a proportion twice as big as Berkshire's ownership stake in any other public company.

Thus, when Apple's stock value declined, so too did the value of Berkshire Hathaway's stock portfolio.

Now what

Exactly how bad the fallout from Apple is falling stock price will be for Berkshire will not be clear until the next reports earnings, probably early next month. But assuming that Apple's stock market is mid-November, when Apple had a market capitalization of roughly $ 890 billion, is worth 24% less today, now that Apple's market cap has shrunk to less than $ 675 billion.

That probably works out of more than a $ 10 billion decline in the value of Berkshire's November stake, and an even steeper decline of $ 20 billion (according to Reuters' calculations) over the last three months.

Granted, that's just a small sliver of Berkshire Hathaway's total stock market value of $ 471.6 trillion. But today, it is apparently a big risk to have spooked a lot of investors out of the Berkshire Hathaway stock.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool has the following options: long January 2020 $ 150 calls on Apple and short January 2020 $ 155 calls on Apple. The Motley Fool has a disclosure policy.