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Warren Buffett’s Legacy: The Future of Berkshire’s Apple Holdings
Purchasing Apple (NASDAQ: AAPL) during his tenure at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) stands as one of Warren Buffett’s noteworthy legacies. Apple’s stock has flourished since Berkshire’s initial acquisition in Q1 2016, and it has frequently held the position of the largest company globally, although it does not currently claim that title.
With Buffett stepping down as CEO at the end of the year and Greg Abel taking the lead, a pressing question arises: Will Berkshire continue to hold its Apple shares? Or is a change in investment strategy on the horizon? Let’s delve into this.
Apple: A Smart Investment in 2016
When Buffett initially bought Apple shares in Q1 2016, the stock offered a very different picture. At that time, it traded at about 10 times trailing earnings, even as its growth was on a downward trend.
AAPL PE Ratio data by YCharts
Despite these indicators, Buffett and his team perceived that Apple devices, especially the iPhone, were immensely popular and integral to everyday life. They believed that the sales decline was temporary, leading them to acquire shares at a bargain price.
Subsequently, Apple’s sales growth returned, causing the stock to rise significantly in value. However, it now appears somewhat overvalued.
AAPL PE Ratio data by YCharts
While Apple is considerably below its peak valuation of more than 40 times earnings, it still trades at roughly three times its price nearly a decade ago. Moreover, revenue growth has significantly slowed, showing only a 5% increase in the last quarter.
This growth rate falls short of market expectations, especially given that Apple’s valuation stands considerably higher than the S&P 500 (SNPINDEX: ^GSPC), which trades at 22.6 times trailing earnings.
Success can lead to emotional attachments; Buffett might be experiencing this with Apple stock, given the substantial profits it generated for Berkshire. Nonetheless, at this stage, Apple’s stock does not represent a value or growth investment but rather stands as an expensive holding.
Berkshire’s Apple Stake: A Significant Reduction
As of Q3 2023, Berkshire held its peak Apple shares: 915.6 million, valued at over $150 billion. This has now reduced to an even 300 million shares, worth approximately $75 billion.
Investors will have to wait at least a year to see how Greg Abel chooses to manage Berkshire’s substantial Apple stake. Should I be in Abel’s position, I’d contemplate divesting shares.
Apple has fulfilled its initial investment thesis but has not introduced new technologies or ideas to drive sales. Current updates are minor, trying to replicate last year’s sales figures. Additionally, Apple’s delay in adopting AI technology has left it trailing behind competitors in this crucial area.
Apple’s innovation has stagnated, and its flagship product, the iPhone, no longer encourages consumers to upgrade annually. Many users are extending their upgrade cycles to three or four years. If Apple shifts production to higher-cost regions like India or the U.S., this trend could reinforce.
Given these factors, it’s an unfavorable environment for Apple shareholders. Even if Buffett sticks with his position, Greg Abel may take a different approach. For individual investors holding Apple shares, now may be the time to seek alternatives—numerous companies offer lower price tags with more promising growth trajectories.
Should You Invest $1,000 in Apple Now?
Before making any decisions about buying stock in Apple, consider the following:
Recent analysis from the Motley Fool team identified the 10 best stocks available now, and Apple was notably absent. The selected stocks could yield significant returns in the coming years.
For context: When Netflix made this list on December 17, 2004, investing $1,000 at that moment would have grown to $614,911!* Likewise, a Nvidia recommendation on April 15, 2005, would have turned $1,000 into $714,958!*
Notably, Stock Advisor’s overall return averages 907%, compared to a 163% return from the S&P 500. Ensure you don’t miss their latest top 10 list by joining the Stock Advisor.
*Returns noted are as of May 5, 2025.
Keithen Drury has no positions in any stocks mentioned. The Motley Fool holds positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the author’s own and do not necessarily reflect those of Nasdaq, Inc.
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