Are Billionaires Dumping Stocks?

Over the past few days, a handful of internet financial influencers have been raising a fuss about billionaires “dumping” stocks. They make note that Jeff Bezos just reported sales of over $1 billion worth of Amazon stock. And they point out Warren Buffett’s sale of much of its stake in Apple’s stock. They then go on to make the case that these billionaires “dumping” stocks means we’re about to face the biggest financial crisis in the history of mankind.

But that’s a pretty big leap. Because, the thing is that people buy stock for one reason: They think it’s going up. But they sell it for any number of a myriad of reasons. Billionaires are no different. It’s just that when they sell stock, people notice. The transactions are just too big for us “normals” not to.

Billionaires Dumping Stock: Bezos’ Business

But to the billionaires making the transactions, they’re just small trades. Case in point: Jeff Bezos has sold $12.5 BILLION worth of Amazon shares in 2024 alone. But as of the date of his last reported transaction, he still owns 914,420,614 shares worth about $194,771,590,782.00:

So, while $12.5 billion sounds like a lot to you and me, it was only 6% of his position. That’s not unreasonable and if you or I trimmed our holding by 6%, it probably wouldn’t mean we though the stock was about to crash. And it’s the same story with Bezos…

If he though we were heading for the worst crisis since the invention of the word “crisis,” I’m sure he’d want to “dump” a little more than 6% of his stake.

Billionaires Dumping Stocks: Buffett Backing Off?

But what about Buffett? He’s selling off Apple like it’s never going to make money again. It’s not the only stock he’s been saying goodbye to, either. He’s also liquidated much of his Bank of America stake. And he’s sitting on a record pile of cash worth around $325 billion.

Surely this billionaire dumping stocks knows something we don’t. And maybe he does. Or maybe he’s cashing in on extremely good investments. And maybe he’s following his strategy like he encourages others to do.

Buffett started investing in Apple back in 2016 when shares cost a split-adjusted $6.81 each. He started divesting them in 2023 when shares were around $200. So he was closing out a 3,000% gain on those initial shares. That’s 30x for those who don’t like percentages.

I don’t think anyone can blame him for finally taking some money off the table after a gain like that. And the story is the same with Bank of America…

Buffett first bought that stock in 2011. He invested $5 BILLION back then when nobody would touch a U.S. bank with a 10-foot pole. Back then, shares cost around $5 each. Today, they go for $45 each. That’s an 800% gain on the stock. Plus, Buffett’s been collecting dividends from those shares, bringing his overall take closer to 1,000%.

So that somewhat explains why this billionaire is dumping stock. But what about that record cash stockpile? He must be sitting on that because he sees a huge drop coming, right? Not necessarily…

Billionaires Dumping Stocks: Buffett’s Billions

You see, Warren Buffett is a disciplined investor. He has a strategy and it works. So he sticks to it.

He doesn’t let FOMO take control of his decisions. And if nothing fits his strategy at the moment, he’s not going to buy anything just because he can afford to.

Buffett looks for unrecognized future value in the companies he buys. And right now, valuations are stretched pretty far. So there aren’t going to be many investments that fit a strategy that looks for low valuations. But valuations change and eventually something will fit the strategy and the Oracle will bite.

I can hear you now, “Aha! So you’re saying a crash is coming…”

No, I’m not. Valuations can change for a number of reasons. Sure, a crash in prices would bring stock market valuations down. But prices aren’t the only part of the valuation equation. Growing corporate earnings could also bring valuations back into Buffett’s wheelhouse. In fact, so would a sideways market.

The Bottom Line on Billionaires Dumping Stocks

The bottom line here is that just because Bezos is taking some profits and Buffett is biding his time to buy back in, it doesn’t mean we’re headed for a crisis tomorrow. It could just mean that they’re taking some profits and taking their time. Or it could mean nothing at all.

Bezos still owns nearly $200 billion worth of Amazon stock. And Buffett’s Berkshire Hathaway still has nearly $300 billion invested in the stock market. Would they really be that exposed if they were certain the end was near?

So next time you hear someone fussing about these billionaires “dumping” stocks, take a little time to find out just how many stocks they’ve “dumped” and how many they still own. Because the latter number is almost always exponentially higher than the former.

And then you’ll have the full picture and not just the part those folks want you to see.