Berkshire Hathaway Nearly Quadrupled its Stake in Apple Stock Last Quarter

[BuddyTronic]

Not actually true.

Failed businesses burn through their cash in a hurry. Cash provides no value cushion at all to investors.

PE is not a magic number. It is meaningless compared to other businesses in the same sector and is meaningless if not compared to revenue and earnings growth. Apple's current growth rate does not justify a PE above the broader market, which is pretty much where it is now.



Now, this is dangerous nonsense. Picking winners is extremely difficult, and more luck than skill, even for those who do it professionally. For the vast majority of investors, diversification is about the only thing they need to worry about. Trying to pick winners is the last thing they should be attempting.

You make good counterpoints.

I'll say this to help my argument if possible - the PE ratio for AAPL stock has been and still is significantly lower than other stocks. It is the largest company in the world, so maybe these are special circumstances, but even so, as the largest company in the world it's revenue is huge, and if the largest company in the world can achieve double digit earnings growth, it's really something special. I think Apple is close to that. It's such a huge company that it has been pointed out that Apple "services" has shown 20% + growth in the last year and guidance is for "services" revenue to double in 4 years indicating 20% growth for "services" at least. It might be true that iPhone sales revenue might not grow at such a rate. But hey, this is the largest company in the world, and even if they coast for several years on iPhone revenue, it's still monstrous revenue from iPhone sales.

As far as the "Are you Diversified?" comments I make - I really do believe that diversification makes no sense when the only stock you need to look at is AAPL. I do not think being diversified brings any safety to a portfolio. It's another topic I guess, but it's just my opinion and I could be wrong - I do not believe in diversification of stocks. For personal net worth, I do believe in some diversification as far as proportions of "real estate" "hard assets" and "stocks" - but for stocks, I have maybe been so lucky with AAPL that I have blinded myself to any other stocks. You may be right - I'm not 100% confident in my own opinion on diversification perhaps.
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Apple has been undervalued for a long time now, but right now
Apple's iPhone business reached a plateau. We will have to see which direction it's going from now on. Major problem is that iPhone sales not only make up their majority of business, iPhone is a carrier for their other services and devices as well.

a) Stay on about the same level at least for a few years because Apple basically reached the maximum of people willing to get an iPhone?
b) Rise again due to emerging markets and new, more exciting iPhones?
c) Go down because the smartphone market is saturated and people begin seeing their phone as a tool again, which only gets replaced when they have to?

I'm going with a) and long term c).
AAPL isn't a stock I would buy for keeping it until pension.
Buying AAPL as part of a 5 or 10 year strategy seems to be a good value, still.

For sure - the caveat to any of this stock stuff is to re-evaluate periodically. I do it all the time, and who knows what might happen in 5 years or 10 years. Tesla and Google are exciting and worth looking at I suppose.

I'm not caring too much about sustained "tech style" mega-growth for iPhone sales revenue. We are past that stage with Apple. I think the valuable information with AAPL is that it is now the largest company in the world with monstrous revenues and very protected revenue streams. I agree with you that eventually we will have a plateau, and maybe we are there already. China sales boomed, and now they are peaking maybe right? India is next to boom, but eventually, the whole planet will have plateau-ed possibly. I am not too worried about this plateau issue. To me it looks like the huge revenue is going to continue for a long while - I feel pretty confident in the next 4 years for Apple. Can the largest company in the world achieve 10% growth even? If so it will double in less than 8 years right? I mean, AAPL is like a country. Maybe I will be happy if it achieves 3% growth at this point. If it has 3% growth for the next several years, it's stock is still undervalued.

New iPhone's seem to be released yearly or so, and there are a lot of people interested in following super cycles and so forth. That's all fine. This company did pretty darn good by converting the planet to cell phone's without any buttons right? With all those Billions of dollars and their killer winning philosophy in business I'd say they stand a very very good chance of succeeding with whatever it might be that they want to bring to the world next. Meanwhile the stock is paying dividends and giving guidance quarter by quarter to the public that seems to have been 99% accurate - so it's very very easy to know what the next quarter will be like for AAPL.

I'd be more concerned about USD hyperinflation happening "some day in the next several years" than anything bad happening with Apple at this point.

I cannot think of anywhere else better to put my life savings, and I cannot lose at this point in the game. My own business cannot do as well as the performance AAPL stock has provided. It is not worth taking the risk to sell my AAPL shares and invest it in my own business. AAPL seems to be the sure thing. I follow it daily of course.

If you can think of a safer stock with better potential, please let me know and I'll consider it. I look daily and everything else looks like high risk compared to AAPL

 

[Pbhogal]

Warren Buffett's holding company Berkshire Hathaway nearly quadrupled its stake in Apple stock to 57,359,652 shares last quarter, according to an SEC filing disclosed today. Its stake in Apple was worth nearly $6.7 billion as of December 31, and over $7.7 billion today if the shares are still held.

Berkshire Hathaway disclosed a nearly $1 billion stake in Apple last May, which led the iPhone maker's stock to soar 9% once the investment became public knowledge. Apple stock has been on the rise since then, closing at an all-time high of $135.02 today just nine months after setting a 52-week low of $89.47 in May 2016.

Apple and Berkshire Hathaway are the world's most and fourth-most valuable companies respectively based on their market capitalizations.

Article Link: Berkshire Hathaway Nearly Quadrupled its Stake in Apple Stock Last Quarter

 

[sundragon]

PUMP AND DUMP! PUMP AND DUMP! PUMP AND DUMP!

It's the oldest trick in the book. He knows Apple sucks, but realizes dumb people still think Apple is going to push something out of Timmy's "pipeline".

The level of negativity is quite amazing... I wonder why you're here if you stopped buying Apple products in 2016. Okay, you can go back to the business of negative commenting

 

[Zedcars]

 

[TallManNY]

If I'm put in charge of Berkshire Hathaway, I will attempt to
purchase as many Apple stocks as possible. I will not stop
until I acquire at least 50.1% of Apple.

Or is that a very bad financial decision?

It would be an impossible decision because as they bought the stock, the stock price would go up, making it more expensive to acquire the next 1%. And Berkshire doesn't have the money to buy 50.1% of Apple even at today's prices.
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I'm sure BH has excellent lines of credit with any bank in the world....
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so does the POTUS!

Yes, excellent credit. But not credit lines in the 10s of billions of dollars. I'm not even sure if those exist. I do know that no bank (or collection of banks) is going to lend you several hundred billion dollars just to buy stock in one company.

 

[Cineplex]

The level of negativity is quite amazing... I wonder why you're here if you stopped buying Apple products in 2016. Okay, you can go back to the business of negative commenting

Good thing you are here to point out negativity. Your comment will do nothing to change that so please continue to enjoy it.

 

[Carnegie]

Where did they get the cash to quadruple their stake in Apple? Legitimately asking here. It seems that to make any major market "moves" or "bets", they'd have to unload something else before buying, no?

They did sell other equities during the quarter, but they bought more equities than they sold (in terms of total value). So they increased their total equities during the quarter, and not just by having the value of those they held go up.

They have (or had ) cash available to do that.
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Buffett dumped nearly his entire position in Walmart. It's worth pointing out that Buffett no longer is the sole decision maker of investing at Berkshire Hathaway. He has two investment deputies and they are the ones who likely bought AAPL, not Buffett.

Berkshire Hathaway often does not disclose its moves at the time of the transaction so it is possible that they divested themselves of something else that has yet to be uncovered.

It's not like Warren bought all those AAPL shares this morning.

They don't disclose all of their equity moves at the time, but they do after the end of each quarter. That's how we know about this large increase in AAPL holdings, because of the 13F that was filed yesterday. We also know from that filing that, yes, they did sell some of their other holdings (e.g., in Verizon).

And... yes, these Apple shares weren't bought yesterday morning. They were bought in the last quarter of 2016. If Berkshire had bought more shares since, we might not know until April.

 

[ksnell]

He's in for a big shock then.

Lol. Although I tend to agree Apple was in better shape on the consumer facing product front 5 years ago, I wouldn't chance betting against the man. He is a bit more successful monetarily than me.

 

[Cineplex]

Lol. Although I tend to agree Apple was in better shape on the consumer facing product front 5 years ago, I wouldn't chance betting against the man. He is a bit more successful monetarily than me.

Even the most successful investors make poor decisions some of the time. His portfolio has losers in it, I can guarantee that.

 

[IJ Reilly]

You make good counterpoints.

I'll say this to help my argument if possible - the PE ratio for AAPL stock has been and still is significantly lower than other stocks. It is the largest company in the world, so maybe these are special circumstances, but even so, as the largest company in the world it's revenue is huge, and if the largest company in the world can achieve double digit earnings growth, it's really something special. I think Apple is close to that. It's such a huge company that it has been pointed out that Apple "services" has shown 20% + growth in the last year and guidance is for "services" revenue to double in 4 years indicating 20% growth for "services" at least. It might be true that iPhone sales revenue might not grow at such a rate. But hey, this is the largest company in the world, and even if they coast for several years on iPhone revenue, it's still monstrous revenue from iPhone sales.

As far as the "Are you Diversified?" comments I make - I really do believe that diversification makes no sense when the only stock you need to look at is AAPL. I do not think being diversified brings any safety to a portfolio. It's another topic I guess, but it's just my opinion and I could be wrong - I do not believe in diversification of stocks. For personal net worth, I do believe in some diversification as far as proportions of "real estate" "hard assets" and "stocks" - but for stocks, I have maybe been so lucky with AAPL that I have blinded myself to any other stocks. You may be right - I'm not 100% confident in my own opinion on diversification perhaps.

Again, PE is not meaningful in a vacuum. Apple reported negative earnings growth for three (or was it four?) consecutive quarters. PE rises when a company's earnings growing rate is increasing or is expected to increase; it declines when their growth rate has declined, goes negative, or is expected to do either. Saying that AAPL was undervalued at recent PEs in the 11-12 range while earnings were in decline is missing the point of PE entirely. I would say the stock actually held up quite up well under the battering of negative earnings growth reports. Saying it is undervalued now at a PE in the 15-16 range because other companies in similar businesses sell for higher multiples is also missing the point of PE.

It's all about growth. When Apple was growing earnings at 40% or so during the real glory years, the PE for AAPL held north of 50 for a long time, and even over 100 for awhile. Just as steady, rapid growth justifies enthusiastic multiples, reduced growth or no growth or negative growth should be expected to produce low multiples.

So, to partly agree with you on one point: if Apple can sustain double-digit growth at this level of revenue then that is indeed something special. However, that kind of growth will sustain a PE in the mid-teens and not much better unless the growth rate shows signs of increasing. The other side of this is, that's not even half bad, because it would mean AAPL increasing at the same rate, plus dividend. But put that IF in capital letters.

As for stock-picking, bad advice. This comes from someone who bought AAPL in 1997 and still holds much of that purchase today. Even so I don't consider myself to be a brilliant stock-picker by any means. I got lucky, is all. I also picked some real dogs. Lesson learned: you are about as likely to pick a winning stock as you are to hit a number on a roulette wheel. Even the pros have a hard time beating those odds. Amateurs, virtually no chance.

So how do you win in investing without taking huge risks on individual stocks? You buy the market. If I was just starting my working life, I would religiously put at least 10% of my earnings every year into an S&P 500 fund. Then as I got older, into a broader array of ETFs (bonds, small company growth, emerging markets, etc). That's about as close to a guarantee as you can get in investing. You will beat inflation by a lot, and retire with a very handsome portfolio, and you won't get murdered when your only stock gets hammered periodically (which it will).

Diversification works. It may not be necessary for the Warren Buffetts of this world, but then, they make their own rain. The rest of us need it.
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It would be an impossible decision because as they bought the stock, the stock price would go up, making it more expensive to acquire the next 1%. And Berkshire doesn't have the money to buy 50.1% of Apple even at today's prices.

They could leverage, but that isn't a Buffett tactic.

 

[code-m]

When you already have more of it than any person on the planet, indeed, probably more that 99.9 percent of all of the people added together, and you're 86 years old (but apparently in good health) what's the point? I concede- he wins.

His is the stock I wished I had been able to buy in the early 70's.

I agree with your sentiment. I had a wealthy friend in the past and asked this question. The response was, they viewed money as a game, the more you have is similar to gaining more points or score in a game. These friends were also the most penny pinching of my circle, did I disassociate from them because of this, no. We just relocated geographically for personal reasons and when we bump into each other, it is always interesting to hear how much more penny pinching their could attain.

The super wealth are playing a game with themselves to see how much wealth one could attain. It is not a game to compete with other wealthy people.

 

[FightTheFuture]

Good thing you are here to point out negativity. Your comment will do nothing to change that so please continue to enjoy it.

From the tone of the post, I don't think he's enjoying your comments at all.

Even the most successful investors make poor decisions some of the time. His portfolio has losers in it, I can guarantee that.

News flash - forum guy thinks he's a better investor than Warren Buffet.

 

[Cineplex]

From the tone of the post, I don't think he's enjoying your comments at all.


News flash - forum guy thinks he's a better investor than Warren Buffet.

News flash - forum guy thinks he's better than other forum guy.

 

[ra535i]

PUMP AND DUMP! PUMP AND DUMP! PUMP AND DUMP!

It's the oldest trick in the book. He knows Apple sucks, but realizes dumb people still think Apple is going to push something out of Timmy's "pipeline".

You nailed it. Buffet drives stock prices single handedly and I for one watches what he puts money in and takes his money out of. If i can afford it, i move as much money i can free up to what he buys very quickly, as well as sell. Key example... He just dropped all his wal-mart stock. if you have any, GTFO of it as soon as you can. seeing apple's stock climb means nothing about their current performance. It's what they have coming up that Berkshire is interested in. But those who are celebrating how amazing apple is as a company based of stock prices is not informed on how prices are driven. Success comes in sales numbers. Celebrate that, not stock prices.

 

[Pootie Tang]

I agree with your sentiment. I had a wealthy friend in the past and asked this question. The response was, they viewed money as a game, the more you have is similar to gaining more points or score in a game. These friends were also the most penny pinching of my circle, did I disassociate from them because of this, no. We just relocated geographically for personal reasons and when we bump into each other, it is always interesting to hear how much more penny pinching their could attain.

The super wealth are playing a game with themselves to see how much wealth one could attain. It is not a game to compete with other wealthy people.

A difference between Warren Buffett and many of the other wealthiest people in the world is that Buffett is giving away 99% of his wealth, mostly via the Bill and Melinda Gates Foundation. Also Buffett's company has helped tens of thousands of median income level people to achieve financial security.
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You nailed it. Buffet drives stock prices single handedly and I for one watches what he puts money in and takes his money out of. If i can afford it, i move as much money i can free up to what he buys very quickly, as well as sell. Key example... He just dropped all his wal-mart stock. if you have any, GTFO of it as soon as you can. seeing apple's stock climb means nothing about their current performance. It's what they have coming up that Berkshire is interested in. But those who are celebrating how amazing apple is as a company based of stock prices is not informed on how prices are driven. Success comes in sales numbers. Celebrate that, not stock prices.

Its ok to celebrate both if you are a consumer of a company's products AND an investor in that company. I invest in products and services that I actually use and like. My Apple dividend pays for my Apple product purchases. My Apple stock is up by 1,900% since I first purchased it many years ago.

 

[TallManNY]

They could leverage, but that isn't a Buffett tactic.

Theoretically Berkshire could leverage. ,But in practice the scale is really too large. You would have to get a bank to lend you money for that leverage. But I'm not sure any one bank can even do a $20 billion deal, much less the necessary many hundreds of billions necessary to buy ever escalating stock as you push toward getting 50% control. So you would have to pull together a huge consortium of many banks and financing sources each willing to contribute 10s of billions of dollars to this transaction. It would be the biggest deal ever by an order of magnitude. But then you'd end up having to answer to a syndicate of dozens of banks. What a pain. And as you say, definitely not Buffett's style. And the stock would still be public. Ugh.

The whole "take Apple private" just can't be done. There isn't enough money consolidated in one place to do it. Well U.S. government and Chinese government could do it, theoretically, I guess. But outside of just those two countries, you would have to get the money from financial institutions. You would never be able to get enough different financing sources to come together to do this.

 

[IJ Reilly]

Theoretically Berkshire could leverage. ,But in practice the scale is really too large. You would have to get a bank to lend you money for that leverage. But I'm not sure any one bank can even do a $20 billion deal, much less the necessary many hundreds of billions necessary to buy ever escalating stock as you push toward getting 50% control. So you would have to pull together a huge consortium of many banks and financing sources each willing to contribute 10s of billions of dollars to this transaction. It would be the biggest deal ever by an order of magnitude. But then you'd end up having to answer to a syndicate of dozens of banks. What a pain. And as you say, definitely not Buffett's style. And the stock would still be public. Ugh.

The whole "take Apple private" just can't be done. There isn't enough money consolidated in one place to do it. Well U.S. government and Chinese government could do it, theoretically, I guess. But outside of just those two countries, you would have to get the money from financial institutions. You would never be able to get enough different financing sources to come together to do this.

Leverage can be achieved by using the target's assets as collateral. That's why leveraged takeovers are often fatal, the target's assets have to be drained or sold off to pay back the loans. Arbitrage based on the theory that the parts are worth more than the whole. Not that I could see Apple being a target of such a thing, or even many smaller companies these days, since they often build "poison pills" into their corporate charters.

 

[TallManNY]

Leverage can be achieved by using the target's assets as collateral. That's why leveraged takeovers are often fatal, the target's assets have to be drained or sold off to pay back the loans. Arbitrage based on the theory that the parts are worth more than the whole. Not that I could see Apple being a target of such a thing, or even many smaller companies these days, since they often build "poison pills" into their corporate charters.

Oh yeah, I'm sure Apple wouldn't allow itself to be taken over. But also if anyone were to really get serious about acquiring Apple, that stock price would shoot to something to $200 or something like that. Suddenly the market would find all of Tim Cook's talk about pipeline very compelling.

And to do a stock buyback of this magnitude you literally have to move hundreds of billions of dollars in cash. It isn't just an analysis of if the deal is good or if there is enough credit. You have to take those hundreds of billions of dollars out of someone's account and send it into the accounts of the shareholders. The scale really would tap the cash reserves of even dozens of the world's largest banks combined. So it is unclear to me that normal big business financing techniques would really work.

 

[WannaGoMac]

Apple's stock price to book value has gotten quite high at over 5. From Warren Buffet's 2015 annual letter:

"If an investor’s entry point into Berkshire stock is unusually high – at a price, say, approaching double book value, which Berkshire shares have occasionally reached – it may well be many years before the investor can realize a profit. In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire is not exempt from this truth."
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Theoretically Berkshire could leverage. ,But in practice the scale is really too large. You would have to get a bank to lend you money for that leverage. But I'm not sure any one bank can even do a $20 billion deal, much less the necessary many hundreds of billions necessary to buy ever escalating stock as you push toward getting 50% control. So you would have to pull together a huge consortium of many banks and financing sources each willing to contribute 10s of billions of dollars to this transaction. It would be the biggest deal ever by an order of magnitude. But then you'd end up having to answer to a syndicate of dozens of banks. What a pain. And as you say, definitely not Buffett's style. And the stock would still be public. Ugh.

The whole "take Apple private" just can't be done. There isn't enough money consolidated in one place to do it. Well U.S. government and Chinese government could do it, theoretically, I guess. But outside of just those two countries, you would have to get the money from financial institutions. You would never be able to get enough different financing sources to come together to do this.

 

[TallManNY]

Apple's stock price to book value has gotten quite high at over 5. From Warren Buffet's 2015 annual letter:

"If an investor’s entry point into Berkshire stock is unusually high – at a price, say, approaching double book value, which Berkshire shares have occasionally reached – it may well be many years before the investor can realize a profit. In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire is not exempt from this truth."
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Well Buffett certainly seems comfortable buying into that valuation. Book value makes more sense when talking about Berkshire shares because every time they buy an asset, security or other investment there is a mark to that book value for that transaction. So Berkshire's book value is probably reasonably close to its true value.

Apple is basically never buying an asset or investment of any significant size. The Beats transaction added $3 billion to Apple's book value (while deducting the same amount from its cash reserves), but that is the exception.

 

[IJ Reilly]

Oh yeah, I'm sure Apple wouldn't allow itself to be taken over. But also if anyone were to really get serious about acquiring Apple, that stock price would shoot to something to $200 or something like that. Suddenly the market would find all of Tim Cook's talk about pipeline very compelling.

And to do a stock buyback of this magnitude you literally have to move hundreds of billions of dollars in cash. It isn't just an analysis of if the deal is good or if there is enough credit. You have to take those hundreds of billions of dollars out of someone's account and send it into the accounts of the shareholders. The scale really would tap the cash reserves of even dozens of the world's largest banks combined. So it is unclear to me that normal big business financing techniques would really work.

True story. The only way Apple becomes part of something else is through a merger financed by stock-swapping but even that seems well nigh impossible, and of course Apple would have zero interest. I have often wondered if they would consider spinning off some of their less-profitable products into separate companies. They did this long ago with Claris (now Filemaker, Inc). Conceivably these could be spun off as public companies rather than as wholly-owned subsidiaries.

 

[TallManNY]

True story. The only way Apple becomes part of something else is through a merger financed by stock-swapping but even that seems well nigh impossible, and of course Apple would have zero interest. I have often wondered if they would consider spinning off some of their less-profitable products into separate companies. They did this long ago with Claris (now Filemaker, Inc). Conceivably these could be spun off as public companies rather than as wholly-owned subsidiaries.

I think Anti-Trust and Monopoly issues may someday force them to do so. We all know that 80% market share of Android devices is an illusion obscuring what is really happening the computer industry. When 44% of the smartphone devices are made by a collection of "Other" companies that are too small even be named, you know they aren't making any money. So you know this cannot continue like this with Apple making all the profit in the industry.

 

[sundragon]

Good thing you are here to point out negativity. Your comment will do nothing to change that so please continue to enjoy it.

Actually, my comment is to point it out - Being mindful of one's mental state is always a good thing You're welcome!