The tables have clearly turned. Apple found its way into Berkshire’s portfolio in 2016. Now, the conglomerate owns over 5% of the Cupertino company’s equity, and AAPL accounts for nearly half of Berkshire’s total assets.
Part of the reason why Berkshire Hathaway is so heavily invested in Apple stock might not have much to do with Warren Buffett himself.
Since the early 2010s, the responsibility of portfolio decisions at the conglomerate has been shared with investment managers Ted Weschler and Todd Combs. Both are speculated to become Berkshire Hathaway’s next chief investment officer.
But even if the Ted-Todd duo may have been most instrumental in nudging Berkshire towards Apple stock a few years ago, Warren Buffett probably also saw the potential in the Cupertino company independently.
Think of the Oracle’s remarks made decades ago about his investment philosophy:
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well.”
In my opinion, Apple checks the boxes of what can be considered “outstanding businesses with outstanding managements”, regardless of what sector of the economy the company operates in.
The Cupertino company has delivered excellent results even past the COVID-19 stay-at-home trends that many thought had distorted Apple’s financial performance and stock valuations.
The value of the company’s brand is undisputed. As a result, demand for Apple products and services seem to be as robust as ever. CEO Tim Cook and his team probably deserve much credit for what Apple has managed to deliver lately.
Apple could be Buffett’s forever holding
Contrary to what a few experts still feared until recently, I still do not think that Apple’s recent success is a pandemic-driven fluke. The business seems to be strong and the executive team, competent to say the least.
For this reason, I believe that AAPL will be one of Warren Buffett’s forever holding. The Oracle himself has suggested the same, in his most recent annual letter to investors, when he ranked Apple the second of Berkshire’s “four giants”.
In the letter, Buffett called Tim Cook “Apple’s brilliant CEO”, and also praised the company’s aggressive share repurchase program. To me, it sounds like Apple stock will remain a staple of Berkshire’s portfolio for a long time.
Apple stock could be one of Warren Buffett’s “forever holding” in Berkshire Hathaway’s portfolio. If you own AAPL today, what do you think is the ideal holding period for this stock?
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)