Intern reporter Zhang Yufan
Buffett's unexpected bet on Apple (hereinafter referred to as " Apple ") may become one of his most successful investments.
As of the end of 2021, Berkshire Hathaway (hereinafter referred to as " Berkshire ")'s stake in Apple rose from 5.39% in 2020 to nearly 5.6%. And as Apple became the world's first company to have a market value of over US$3 trillion (about RMB 19 trillion) in early 2022, the market value of the shares held by Buffett also rose from US$36 billion to more than US$160 billion, and she made more than US$120 billion from Apple alone.
pointed out in Buffett in 2022 "Letter to Shareholders" that the increase in stake in Apple did not cost Berkshire's funds, but Apple's repurchase played a role. In the letter
, Buffett praised Apple's performance: "Only Apple's dividends will be included in Berkshire's financial report. Last year, Apple paid us a dividend of $785 million. However, based on our 'shareholding' in Apple, the profit reached an astonishing $5.6 billion."
He also praised Apple's management: "Apple's talented CEO Tim Cook regards users of Apple products as their first love, and his excellent management touch has also benefited supporters a lot."
Berkshire's increase in holdings in Apple is due to the "magic of buybacks" mentioned by Buffett many times. Stock repurchase refers to the act of a listed company using cash and other means to repurchase a certain amount of shares issued by the company from the stock market.
For Apple, repurchases have become the core part of the investment reason. Investors like buyback programs because this can reduce the number of shares in the company, thereby boosting earnings and stock prices.
Apple began paying quarterly dividends and repurchasing shares since March 2012. Since then until the summer of 2021, Apple has spent more than $467 billion on stock buybacks, according to data provided by S&P Global Markets Finance.
According to Phoenix Technology's analysis, Apple's stock price has risen by 252% since 2018, but its market value has only increased by about 200%. This difference is a direct result of Apple's buyback program, which has reduced the number of Apple's outstanding shares from about 19.4 billion shares at the end of June 2018 to about 16.4 billion shares at the beginning of 2022.
In the 2021 "Letter to Shareholders", Buffett also mentioned Apple's repurchase, saying, "With these repurchases, Berkshire shareholders not only have greater interest in our insurance group, as well as BNSF and BHE, but they will also find that their indirect ownership of Apple is also increasing. The repurchase is proceeding slowly, but may become stronger over time. This process provides an easy way for investors to have an ever-expanding share of special enterprises. As May West assured us: 'too many good things can be beautiful'."
At the 2020 shareholders' meeting, Buffett also expressed his support for the repurchase. He said cashback to investors through repurchases has become one of the most popular methods nowadays, which is valuable and responsible because investors can accumulate ownership equity “whether they want to or not” without being forced to use their annual profit share of their taxable dividends. At the same time, he also added that stock repurchases should be carried out in a timely manner and should not become a convention. He said: "Companies should buy back stocks when their stock price is lower than their actual value. If the stock value is lower than its actual value, it is a huge mistake not to buy back stocks at this time."
For decades, Buffett has had a special liking for the consumer and financial industries and is not keen on investing in technology stocks . His reason is: "High-tech companies are changing too quickly. I don't know whether the sustainable competitive advantages of companies can continue to be maintained in the next ten years."
Buffett, who is not passionate about technology stocks, bought Apple in 2016. So far, Apple has accounted for 47.61% of Berkshire's total position , accounting for almost half of the land.
From Buffett's usual point of view, "Apple is a consumer goods company that uses technology, and it belongs to the consumer goods industry."
At the shareholders' meeting in May 2021, Buffett also revealed the reason for his optimism about Apple. "Apple is an extraordinary company. They have excellent management and their products have loyal fans around the world. Apple's brands and products are very outstanding, and the profit margins are also very high. At the same time, mobile phones are an indispensable must-have in the lives of all young people."
Buffett also showed a long-term attitude in Apple's investment. In May 2019, on the special "Everyone" program of Yahoo Finance, Buffett said in an exclusive interview that he would not closely track the latest situation of Apple and compared Apple to a farm. "When you buy this farm, you think about holding it all the time." Regarding Apple, he said, "This is a long-term investment."
In the words of Buffett in his interview with CNBC in 2020, investing in Apple is not a stock investment, but Berkshire's third largest business besides insurance and railways.
