Warren Buffett's Stake in Apple Approaching a Quarter of Berkshire Hathaway's Entire Market Value

[MacRumors]

Warren Buffett's $113 billion stake in Apple is approaching a quarter of his investment firm Berkshire Hathaway's entire market value, according to Business Insider. Adding in Berkshire Hathaway's $147 billion in cash assets, Apple and cash represent over half of the firm's market value.

Berkshire Hathaway held approximately $260 billion in cash and Apple stock at the last count, representing 52% of its $499 billion market capitalization, with Apple alone representing about 22.5% of Berkshire Hathaway's market value. Berkshire Hathaway's stock price is down about 9% this year even as Apple's share price has risen over 50%, exacerbating the impact of heavily weighted cash and Apple holdings.

Subtracting Apple shares and cash, the remainder of Berkshire Hathaway is valued by the market at just $240 billion, which is surprising given the scale of Berkshire Hathaway's operations. The company owns many businesses, including Geico, See's Candies, Dairy Queen, Duracell, Fruit of the Loom, NetJets, Precision Castparts, PacifiCorp, MidAmerican Energy, the BNSF Railway, and Marmon, which itself owns more than 100 manufacturing and services businesses.

Warren Buffett held 245 million Apple shares as of the end of June, representing a 5.7% stake in Apple as a whole. The stock price of Apple has soared by over 57% to an all-time high this year, boosting the value of Berkshire's Apple holdings by more than $40 billion to around $113 billion as of yesterday. Apple is by far the largest investment held in Berkshire Hathaway's portfolio, worth more than four times as much as its second-largest holding, a $25 billion stake in Bank of America.

These calculations were completed before Apple passed a market value of two trillion dollars earlier today. Berkshire Hathaway's holdings have been particularly exposed to the global health crisis in recent months via its multiple insurance, manufacturing, retail, and service businesses, but this has been largely offset by the soaring value of Apple shares. The value of the firm's Apple stake relative to the rest of its portfolio highlights the extent to which investors are increasingly favoring tech companies and neglecting more traditional businesses such as banks and insurers.

Article Link: Warren Buffett's Stake in Apple Approaching a Quarter of Berkshire Hathaway's Entire Market Value

 

[4jasontv]

A reminder that before Buffett got his McGold card he would tell his wife to fill a cup with $2.61, $2.95 or $3.17 based on if he lost money, broke even, or was up.

He treats money like he regularly watched his mother skip meals so his father could go to work fed.

Because he did.

 

[TheYayAreaLiving 🎗️]

I smell money. $$$

 

[jerryk]

If Berkshire is going to continue to hold this concentration in Apple stock I am thinking about selling my Berkshire shares. I will use the proceeds to increase my holdings of Apple, Microsoft, Tesla, and a few other companies.

I have owned Berkshire for decades, but Buffet and Munger are way past their prime and missed a lot of opportunities. They went long in things like insurance, car rental, and airline stocks.

 

[architect1337]

I'm wondering if Apple is a tad over-valued at the moment. I'm not seeing anything from Apple that justifies this valuation ongoing. Of course they are going to speculate into particular industries, which is good, but fundamentally, they are a phone handset company with very little on the horizon.

 

[Andres Cantu]

I thought diversification was the name of the game? But then again, who am I to argue against Buffet?

 

[jerryk]

I'm wondering if Apple is a tad over-valued at the moment. I'm not seeing anything from Apple that justifies this valuation ongoing. Of course they are going to speculate into particular industries, which is good, but fundamentally, they are a phone handset company with very little on the horizon.

Agree about the overreliance on phones. But, I think Apple Silicon will start a new chapter for its computer business. Complete with the same app available on any Apple platform. And with Apple taking a hard line on in-app purchases including subscription, a nice continuous revenue stream.

 

[Sasparilla]

I thought diversification was the name of the game? But then again, who am I to argue against Buffet?

I think Covid has messed alot of the plans and default ways of doing things up for the moment.

 

[jerryk]

I thought diversification was the name of the game? But then again, who am I to argue against Buffet?

You should argue with Buffet. He and Charlie's old standbys of insurance and travel are no longer working.

 

[Vanilla35]

He's also buying gold, so I'm definitely not taking his advice on everything. With that said, I still like apple even at this price.

 

[chabig]

fundamentally, they are a phone handset company with very little on the horizon.

Other than phones, they also happen to own the largest uncontested tablet franchise on the planet, the largest uncontested smart watch franchise on the planet, and soon will be the undisputed leader in portable personal computer performance.

 

[Bistroengine]

It pains me to this day that I didn't have the cash to invest in Apple Stock in 1997 when it was about $11 dollars per share and everyone thought Apple would go bankrupt. I knew deep down that wasn't going to happen because Steve Jobs had just returned to Apple. I could've been a millionaire by now Also, fun side note...I live just a few blocks away from Warren's house in Omaha.

 

[DocMultimedia]

It pains me to this day that I didn't have the cash to invest in Apple Stock in 1997 when it was about $11 dollars per share and everyone thought Apple would go bankrupt. I knew deep down that wasn't going to happen because Steve Jobs had just returned to Apple. I could've been a millionaire by now Also, fun side note...I live just a few blocks away from Warren's house in Omaha.

And with all the splits the shares were the equivalent of less than $1 a share. I'm glad I had some cash and did buy some back in 2005 at an equivalent share price of $8.

 

[The Barron]

Go Apple! I'm hoping it hits $500 per share by Aug. 31st aka SPLIT DAY

 

[Vol Braakzakje]

Unethical amount of money to be honest.

 

[nylonsteel]

you da man warren
awsome move buying into aapl when you did

 

[citysnaps]

I'm wondering if Apple is a tad over-valued at the moment. I'm not seeing anything from Apple that justifies this valuation ongoing. Of course they are going to speculate into particular industries, which is good, but fundamentally, they are a phone handset company with very little on the horizon.

Apple wearables are doing well. Services revenue has been expanding. Apple's large investment into AR will soon come to fruition with products and services. And Apple Silicon will pay huge dividends going forward in computers and other devices. And Apple's aggressive entry into AppleTV+ streaming is off to a good start.

Big hat-tip to Mr. Cook for his vision and strategic planning recognizing years ago that mobile phones would eventually be plateauing.

 

[KaliYoni]

Apple's market cap is not relevant to how Warren Buffett and Charlie Munger, Buffett's business partner, manage BRK's portfolio. Instead, they are focused on what they call intrinsic value. They talk about this in some fashion every year in the Annual Report, but the core concept is fully laid out in their Owners Manual on page 22:

https://berkshirehathaway.com/ownman.pdf

Yes, BRK does sit on a lot of cash. One reason is Buffett places a lot of importance on having a fortress balance sheet so that BRK is never in a position to have to borrow money under duress. Another reason is that BRK is really an insurance and reinsurance company in many ways. That means it has to maintain a certain amount of cash to ensure it can pay claims. This is especially important for BRK's non-consumer insurance lines, such as disaster insurance, that have unpredictable and potentially gigantic payouts.

 

[tribeaumes]

I'm wondering if Apple is a tad over-valued at the moment. I'm not seeing anything from Apple that justifies this valuation ongoing. Of course they are going to speculate into particular industries, which is good, but fundamentally, they are a phone handset company with very little on the horizon.

I think all tech companies are in the same boat. Who’s really innovating anymore nowindays? Apple is worth the investment because they always delivery in quality (my opinion) and if they fall short they try to fix it.

 

[Cosmosent]

I remember when he came on CNBC just a few years ago & talked about how he used his Grand Kids' interest in their Apple products to figure-out his interest in AAPL.

Leo Cooperman did the exact same thing about the exact same time !

 

[synergize]

He's also buying gold, so I'm definitely not taking his advice on everything. With that said, I still like apple even at this price.

I never understood why companies sell their gold, if it has more value that cash, and is a hedge against inflation and economic collapse.

 

[what-?]

Warren has made sooo many unforced errors these last few years, from Kraft-Heinz, to the airlines to Occidental Petroleum. It's his lieutenants that purchased Apple, and Amazon. Without these core holdings and in the qty BRK owns them, we'd be throwing dirt on the grave of this 19th century conglomerate.

 

[what-?]

He's also buying gold, so I'm definitely not taking his advice on everything. With that said, I still like apple even at this price.

no, he's buying a gold miner. the economics (cost of getting it out of the ground versus retail price) make sense at this point. watch how fast he dumps this when the price of gold drops because the economics wont make sense

 

[Velli]

I'm wondering if Apple is a tad over-valued at the moment. I'm not seeing anything from Apple that justifies this valuation ongoing. Of course they are going to speculate into particular industries, which is good, but fundamentally, they are a phone handset company with very little on the horizon.

Until fairly recently, I always scoffed at people who said Apple’s strategy was to “pull you in” and then make money off services. It didn’t seem services would ever come close to matching iPhone revenue. I have to admit now that I was wrong. Apple is quickly becoming a service company, and devices will be just the gateway.

There are so many hints. They care about Apple TV, because they can sell services on it. They don’t care about Airports, because there’s no potential for service revenue there. So that product is out. Their services increasingly pop up on other devices.

And, it makes sense. As development of smartphones matures, people buy them less often, and are less willing to pay extra for hardware features, so the likelihood they buy a cheap Android phone will increase. Look at China, where a phone is more or less a Wechat delivery device, so Apple is failing. Apple has to be, and is already, less reliant on hardware income.

Point being, Apple can grow vastly in services compared to today. Much more so than in hardware alone. This is why I do believe they can double again in a few years. Only thing to stop them is politics (which is increasingly likely to happen)

 

[827538]

He's also buying gold, so I'm definitely not taking his advice on everything. With that said, I still like apple even at this price.

My wife is a lawyer who regularly has to tour banks and vaults in Europe to essentially check on her client's gold holdings. There's so much gold being bought that a lot of their vaults are full and they are now using safety deposit boxes and buying gold in smaller sized bars. They are all worried about the current global financial situation due to COVID and uncertainty in the run up to the election. In fact she's in talks about building major new gold vaults.

Buying gold isn't a bad thing, most of her clients don't buy gold simply to make money, like Swiss Francs they buy them for security even if it costs them. The huge amount of money printing has everyone worried. Personally I'm not buying more gold but I am selling USD and buying Swiss Francs. Just the threat of the DNC winning has me worried.

Apple is overpriced, doubling in value like this in such a short space of time without a corresponding increase in revenue is not normal. There's a big market correction coming, strangely this year has been incredibly profitable for me, now I just need to decide on my exit strategy.