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Investing Insights: Warren Buffett’s Apple Affair A Peek into Warren Buffett’s Deep Dive into Apple Stock

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Warren Buffett’s investment prowess is nothing short of legendary. As the head honcho of Berkshire Hathaway, his track record speaks volumes – delivering remarkable annual gains averaging close to 20% over a staggering 58-year span. This performance dwarfs the S&P 500’s comparatively modest annual uptick of just over 10%.

Buffett crafted this success by carefully selecting stellar American businesses spanning sectors such as finance, consumer goods, and energy. Surprisingly, his largest current holding lies in a realm where he traditionally treads lightly: technology. What makes this foray even more intriguing is that this substantial investment aligns with a group of tech-centric stocks affectionately known as the “Magnificent Seven” – a nod to both a 1960s Western classic and its modern-day counterpart. These prestigious members, all rooted in the tech domain, include Alphabet, Amazon, Apple (NASDAQ: AAPL), Meta Platforms, Microsoft, Nvidia, and Tesla.

Which of these luminary stocks snagged Buffett’s attention to seize the top spot in his investment portfolio? None other than the tech giant ruling the smartphone world – Apple. Shares in Apple constitute approximately 50% of the billionaire investor’s colossal $347 billion portfolio. Let’s delve into the intricacies of how and why Buffett cemented his position in Apple and explore whether mimicking his maneuver into Apple stock is a prudent move.

Warren Buffett is shown at an event.

Image source: The Motley Fool.

Buffett’s Apple Investment Odyssey

Buffett’s foray into Apple stock commenced in 2016, with Berkshire accumulating over one billion Apple shares within two years, translating to a 5.2% stake in the tech titan. Over time, the ownership stake surged as a result of Apple’s aggressive share repurchase program. These buybacks, by reducing the volume of shares in circulation, upscale the ownership proportion of extant shareholders. Currently, Berkshire boasts a substantial 5.8% ownership in Apple.

In his 2020 shareholder letter, Buffett extolled the virtues of share repurchases as an easy route for investors to amass a growing slice of exceptional businesses, illustrating his favorable stance on Apple’s strategic move.

Now, the burning question: Why did Buffett, who typically steers clear of tech ventures, gravitate towards a colossus like Apple? The reason is simple – Apple embodies the quintessential investment qualities that Buffett admires: sound business acumen, a robust competitive moat, and a shareholder-friendly structure facilitating benefits through dividend distributions.

Buffett undoubtedly appreciates Apple’s impressive track record of revenue and return on invested capital growth over the years.

AAPL Revenue (Annual) Chart

AAPL Revenue (Annual) data by YCharts.

These indicators underscore Apple’s knack for producing sought-after products, effective cost management, and prudent investment strategies. Buffett’s commendation of Tim Cook as “Apple’s brilliant CEO” in his shareholder missives signifies his endorsement of Cook’s strategic vision for Apple’s future trajectory.

Apple’s Impenetrable Moat

Steering towards Apple’s competitive advantage or ‘moat,’ Buffett’s investment philosophy extols businesses fortified with impregnable moats. Such firms effortlessly maintain market leadership positions, safeguarding earnings growth from competitive erosion.

Apple’s moat springs from its potent brand equity, fostering unwavering customer loyalty beyond the influence of price fluctuations or entry of rival offerings. The latest quarterly report from Apple reveals a surge in iPhone upgrades, concurrently marking a milestone of 2.2 billion active devices within the company’s ecosystem – a testament to Apple’s enduring appeal since its inception in the ’70s.

Moreover, Buffett’s penchant for dividends finds solid ground in Apple, one of the few tech entities issuing dividends. Buffett disclosed in a recent shareholder communication that Berkshire’s annual dividend inflow from Apple averages a lofty $775 million.

While most of us can’t aspire to mirror Buffett’s colossal dividends, any dividend yield presents a valuable addition to our portfolios, nurturing long-term wealth creation.

Is the “Magnificent Seven” Worth the Buy?

Should we shadow Buffett’s Apple odyssey? Although Apple now commands a higher earnings multiple compared to Buffett’s initial foray, the firm’s revenue trajectory is upwards, with an expanding array of revenue channels.

AAPL PE Ratio Chart

AAPL PE Ratio data by YCharts.

Capitalizing on an extensive global device user base, Apple is riding the crest with burgeoning services revenues attaining record heights. The tech titan’s diverse subscription offerings, from cloud storage to digital content, are luring users, hinting at nascent growth possibilities.

All signs point to Apple’s current valuation as being reasonable when juxtaposed with its impressive historical performance and promising future prospects. Thus, this top-ranking “Magnificent Seven” stock, perched atop Buffett’s zenith, beckons as an equally enticing bet for the rest of us.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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