In his 58 years of running Berkshire Hathaway, buying stock in Apple is arguably Warren Buffett’s biggest investment success, contends an article in Barron’s. At the end of June, Apple’s market value reached $3 trillion, making Berkshire’s stake in the company worth $176 billion—five times the original cost of $31 billion when Buffett bought it in 2016.
It’s well-known that Buffett is drawn to high-quality companies, but he’s also very disciplined about what he spends on them. Back when Buffett started accumulating a position in Apple, he paid roughly 15 times earnings. That’s the high end of what he will usually pay for a company; when he acquired stock in Coca-Cola, he shelled out about 18 times earnings. That investment is now worth about $24 billion. Buffett saw in Apple the potential that it wasn’t just a technology company but a lasting brand with a loyal customer base. Indeed, at the time of his initial investment he said one thing that prompted him to buy Apple was when he took his grandkids out for ice cream and they were on their iPhones the whole time. He’s also a big fan of Apple’s CEO Tim Cook, calling him an “extraordinary” manager, according to the article.
Buffett’s initial investment has been rewarded by earnings growth, with Apple predicted to triple earnings to $6.75 per share through the fiscal year ending in September 2024. His position is now a 6% stake in the company, and it’s highly unlikely that he would trim that investment anytime soon, given his reluctance to pay capital-gains taxes and his lack of concern about having concentrated investments. The Apple position accounts for almost half of Berkshire’s $370 billion equity portfolio as well as nearly a quarter of the conglomerate’s market value of just about $750 billion. Coca-Cola, American Express, Chevron, and Bank of America follow far behind, with each accounting for 6% to 8% of Berkshire’s portfolio. Another thing Buffett loves about Apple? They continually repurchase stock, increasing Berkshire’s percentage ownership while Berkshire does nothing. Given how many of Buffett’s boxes Apple checks off, it’s likely the tech giant will be one of those stocks that Berkshire holds onto forever, Buffett’s favorite holding period, the article concludes.
