By
Godfrey Benjamin
April 23rd, 2024
Warren Buffett, the famous American investor, has become an adherent of Apple’s stock as he referred to Apple as one of the four giants steering his conglomerate’s value.
Warren Buffett, the CEO of Berkshire Hathaway, has seen the most return on his Apple Inc (NASDAQ: AAPL) investment since his all-time most remarkable investment in Coca-Cola (NYSE: KO). Berkshire Hathaway Inc (NYSE: BRK.) started buying Apple’s stock in 2016. By mid-2018, he accumulated a 5% ownership of the multinational technology company with a cost of $36 billion. As Apple increased over the years, Buffett also saw gains over his investment. With the profits, the American investor’s stake in Apple has spiked to over $160 billion, which brings his return on paper to more than $100 billion between 2016 and now.
Buffett Realizes Huge Returns on Apple’s Investment Within Six Months
Warren Buffett made huge returns on his Apple investment within six years, which has called experts’ attention. Investment experts have compared Buffett’s stakes in Apple to his shares in Coca-Cola, which he started buying in 1988. Since the CEO started buying stocks of the beverage company, KO has grown more than 2,000%, and it is Berkshire Hathaways’ fourth-largest equity position with 400 million shares.
Bill Smead, Chief Investment Officer at Smead Capital Management Inc., said
“Buffett is having his Coca-Cola moment on Apple. They both went way up the first five to seven years he’s owned them.”
Warren Buffett’s investment in Apple is unusual for him. The successful investor is known as a value investor, purchasing undervalued stocks with solid bases for a discounted price, then holding them as long-term investments. In the case of Apple, he bought Apple stock for $31 billion, at $35 per share.
James Shanahan, Berkshire’s analyst at Edward Jones, said:
“Apple has been a home run for Berkshire, no doubt, Buffett acquired most of the position at an average cost of about one fourth of the current market price.”
Warren Buffett’s stake in Apple played a crucial role in helping Berkshire Hathaway remain in business through the pandemic. At the peak of the global health crisis, other subsidiaries, including construction, energy, and insurance, incurred huge losses.
Buffett Suggests Long-Term Investment in Apple in 1988 Annual Letter
Warren Buffett, the famous American investor, has become an adherent of Apple’s stock as he referred to Apple as one of the four giants steering his conglomerate’s value. Additionally, the CEO has also benefitted from Apple’s stock repurchase strategy. As of the end of 2021, Berkshire Hathaway Inc. had 5.43% ownership in Apple. The multinational conglomerate company receives an average of $775 million annually as dividends from the iPhone maker.
Taking a cue from Buffett’s letter about purchasing Coca-Cola’s shares in 1988, Warren Buffett is with Apple for the long term.
He wrote in his 1988 annual letter to all shareholders of Berkshire Hathaway Inc.:
“In 1988 we made major purchases of Federal Home Loan Mortgage and Coca Cola. We expect to hold these securities for a long time. In fact, 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…”
On its biggest single trading day in a month, Apple stock rose 6% on 24th February after firstly taking a quick plunge as news of Russia’s invasion of Ukraine broke. The price went as low as $152 during trading hours and jumped $162 during extended trading hours. At the time of writing, AAPL is trading at $162.95.