Apple shares (AAPL) now represent almost 40% of Berkshire Hathaway’s holdings. But speaking to Berkshire (BRK-A, BRK-B) shareholders on Saturday, CEO Warren Buffett said Apple’s holding of this percentage of Berkshire’s overall investment portfolio meant it could keep the business going. I pointed out that I didn’t understand it correctly.
“Apple is not 35% of Berkshire’s portfolio,” Buffett said. “The Berkshire portfolio includes rail and energy businesses like Garanimals and Seeds Candies.These are all businesses.”
Berkshire posted $997 billion in assets at the end of the first quarter, of which only $328.16 billion was invested in equities. Still, Apple has been a big holding in Berkshire’s stock portfolio since Berkshire first started buying in 2016.
This comes not only from additional purchases by Berkshire, but also from the growth of Apple’s services business and Apple’s commitment to repurchase its own shares. Since Berkshire first bought Apple, Apple’s stock has risen more than 500%, and buybacks have increased Berkshire’s stake in Apple. Today Berkshire owns about 5.8% of the company.
“It just happens to be better than any business we own,” Buffet said. “And we put a good amount of money into it, but we don’t have more money than the railways… our railways [a] very good business, [but] It wasn’t as good as Apple’s business. “
Buffett has long supported Apple CEO Tim Cook and the stickiness of the company’s products, including the iPhone. [iPhone] All in all, I understand consumer behavior. “
Less than 24 hours after rising iPhone sales sent Apple shares soaring nearly 5% on Friday, Buffett again touted the iPhone’s strategic advantage.
“Apple is in a position to pay consumers $1,500 or more for a cell phone,” Buffett said. “And he paid $35,000 for the same people to have his second car, [when] They have to give up their second car or give up their iPhone. I would give up on the second car. In short, it is an exceptional product. We don’t own 100% of anything, but we’re very, very, very happy with 5.6%, or whatever it is. “
The debate over Berkshire’s ownership of Apple stems from investor questions about portfolio diversification. Berkshire owns a lot of stock, but its top holdings are fast becoming the company’s largest holdings. 5 companies include About 75% of Berkshire’s shareholding.
Buffett’s right-hand man, Charlie Munger, doesn’t think the lack of diversity is a problem.
“One of the insane things [that gets] “What modern college education teaches is that investing in common stocks absolutely requires a large amount of diversification,” Munger said. Having a huge number of easily identifiable opportunities is not so easy. If there are only three, I’d rather pick the best idea than the worst one. And now some people, unable to distinguish between their best and worst ideas, come to think that in the act of judging that an investment is already a good one, it is better than it actually is. I think we make such mistakes less often than others. And it’s a blessing for us. “
Josh is a reporter at Yahoo Finance.
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