Warren Buffett's investment in Apple (AAPL) stock has quickly become the most prominent holding in Berkshire Hathaway's (BRK-A, BRK-B) $360 billion equity portfolio.
Berkshire first bought the stock in 2016, and since then Apple has grown to a $110 billion position comprising roughly 40% of Berkshire's stock holdings. Berkshire owns just under 6% of Apple.
The rapid growth has positioned the largest US public company as a fixture in Berkshire Hathaway's annual shareholder letters and Buffett's comments during annual meetings.
At Berkshire's annual shareholders meeting on Saturday, investors will eagerly await what Buffett might say about his largest holding and its new forays into augmented reality headsets, in-house computer chip creation, and expansion in India.
The meeting also comes less than 48 hours after Apple's earnings report published late Thursday, which showed better than expected iPhone sales despite a 3% revenue decline year-over-year.
Year-to-date, shares of the iPhone maker are up nearly 30%.
The four 'jewels'
In 2020, Buffett highlighted the Apple investment as one of the company’s four "jewels," along with Berkshire's insurance operations led by Ajit Jain, Berkshire's ownership of railroad BNSF, and its Berkshire Hathaway Energy subsidiary.
From shareholder returns to its brand recognition to its management team, Apple fits the bill for a Buffett bet.
Buffett has long been a believer in the benefits of share buybacks and highlighted outsized dividend payments Berkshire receives from some long-time holdings like Coca-Cola (KO) and American Express (AXP) in this year's letter to shareholders.
"Our cost for that stake was $36 billion," Buffett wrote in his 2020 annual shareholder letter about the company's investment in Apple. "Since then, we have both enjoyed regular dividends, averaging about $775 million annually, and have also — in 2020 — pocketed an additional $11 billion by selling a small portion of our position.
"Despite that sale — voila! — Berkshire now owns 5.4% of Apple. That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding." Today, Berkshire owns about 5.8% of the company.
The Oracle of Omaha, however, was patient in entering the fray on his Apple position.
Berkshire didn't place its bets on the company after the success of Apple's iPod launch in 2001 or its iPhone launch six years later. Instead, Buffett's ride with Apple has been fueled largely by growth in the company's services business.
In 2015, Apple reported annual services revenue of $19.9 billion and wearable revenue of $10.1 billion.
In 2022, those categories produced $78.1 billion and $41.2 billion, respectively.
"I just think of basically the utility of those products to a ecosystem that is demographically terrific and finds that instrument useful dozens and dozens of times a day," Buffett told Yahoo Finance in 2020. "It's almost indispensable, not only to individuals, business, I mean, everything."
More recently, Apple launched its high-yield savings account with Goldman Sachs, and at an event in September 2022 the company stressed its ambitions to integrate more deeply with healthcare tools.
And when it comes to management, Buffett has rarely been lacking for praise of Apple CEO Tim Cook.
"Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well," Buffett wrote in Berkshire's 2021 letter to shareholders.
Adding at the 2021 annual shareholders meeting: "Tim Cook was underappreciated for a while. He's one of the best managers in the world. And I've seen a lot of managers. And he's got a product that people absolutely love. And there's an installed base of people, and they get satisfaction rates of 99%."
Josh is a reporter for Yahoo Finance.
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As an enthusiast deeply immersed in the world of finance and investment, I've closely followed Warren Buffett's investment strategies, particularly his notable stake in Apple (AAPL). My understanding extends beyond mere headlines, delving into the intricate details that shape Berkshire Hathaway's $360 billion equity portfolio.
Warren Buffett's decision to invest in Apple dates back to 2016, a move that has since evolved into the largest holding in Berkshire Hathaway's portfolio, accounting for approximately 40% of its stock holdings with a valuation of $110 billion. Berkshire's ownership of just under 6% of Apple showcases the magnitude of this investment.
The annual shareholders meeting, a highly anticipated event, serves as a platform for Buffett to share insights into his investment decisions. In this year's meeting, there's particular interest in Buffett's comments on Apple's recent ventures into augmented reality headsets, in-house chip creation, and its expanding presence in India.
The strategic timing of the meeting, less than 48 hours after Apple's latest earnings report, adds an extra layer of significance. Despite a 3% revenue decline year-over-year, the report revealed better-than-expected iPhone sales, contributing to a year-to-date surge of nearly 30% in Apple's shares.
Buffett has classified Apple as one of Berkshire Hathaway's four "jewels," alongside its insurance operations, ownership of railroad BNSF, and its Berkshire Hathaway Energy subsidiary. The confidence in Apple is attributed to various factors, including shareholder returns, brand recognition, and an effective management team.
Buffett's affinity for share buybacks is evident in his praise for Apple's approach. The 2020 annual shareholder letter highlights the costless increase in Berkshire's ownership to 5.8%, thanks to Apple's continuous share repurchases. The annual dividends and additional profits from selling a portion of the position further underscore the success of this investment.
Contrary to popular belief, Buffett's entry into Apple was not triggered by the success of the iPod or iPhone launches. Instead, it was fueled by the significant growth in Apple's services business, which, by 2022, contributed $78.1 billion in annual revenue. Wearable revenue also soared from $10.1 billion in 2015 to $41.2 billion in 2022.
Beyond the financials, Apple's strategic moves into areas like high-yield savings accounts and deeper integration with healthcare tools align with Buffett's appreciation for the utility of its products in a demographically attractive ecosystem.
In terms of management, Buffett has consistently praised Apple CEO Tim Cook, highlighting his managerial prowess and the widespread satisfaction among Apple product users. Cook's strategic vision and the loyalty of Apple's user base further reinforce Buffett's confidence in the company.
In conclusion, Warren Buffett's investment in Apple is a testament to his patient and strategic approach to investing, focusing on long-term value and growth rather than short-term market trends. This deep dive into the details of Berkshire Hathaway's investment in Apple underscores the multifaceted factors that contribute to the success of this prominent holding in their portfolio.
