Warren Buffett’s Berkshire Hathaway Inc. released its highly anticipated annual letter this morning, offering details on the conglomerate’s investments in 2020. In this year’s letter, Buffett touted that Apple ranks as the largest investment in Berkshire common stock, a even though the conglomerate sold 9.81 million shares. from AAPL at the end of 2020.
Warren Buffett at AAPL:
Buffett touts AAPL as a stock that “vividly illustrates the power of buybacks.” Berkshire began acquiring Apple shares in late 2016 and currently owns $ 120 billion worth of stock, at a cost of $ 31.1 billion.
Berkshire’s investment in Apple vividly illustrates the power of buybacks. We started buying Apple stock in late 2016 and, as of early July 2018, we owned just over 1 billion Apple shares (adjusted for division).
When we finished our purchases in mid-2018, Berkshire’s general account owned 5.2% of Apple.
Buffett also says that Berkshire sold a small portion of its stake in AAPL in late 2020, pocketing $ 11 billion. However, due to Apple buybacks, which reduce the total number of shares outstanding, Berkshire’s ownership of AAPL has increased to 5.4% despite that sale:
Since then we have both enjoyed regular dividends, averaging around $ 775 million annually, and also, in 2020, we have pocketed an additional $ 11 billion by selling a small portion of our position.
Despite that sale, voila! – Berkshire now owns 5.4% of Apple. That increase came at no cost to us as it came about because Apple has continually bought back its shares, thereby substantially reducing the number it now has in circulation.
This also has benefits for Berkshire shareholders, Buffett explains in the letter:
But that’s far from all the good news. Because we also bought back Berkshire stock over the two and a half years, you now indirectly own 10% more of Apple’s assets and future earnings than you did in July 2018.
What Bloomberg Buffett reportedly resisted buying Apple stock for years because he said he didn’t understand the tech company. However, by working with investment representatives Todd Combs and Ted Weschler, Berkshire expanded and has since added other technology companies such as Amazon and Verizon as well.
AAPL is now one of Berkshire’s three most valuable assets, aligning itself with its insurers and BNSF Railway, the US rail purchase the conglomerate completed in 2010.
However, while Berkshire Hathaway is a major investor in Apple, Warren Buffett himself only switched from a folding phone to the iPhone last year. Buffett said at the time that Apple CEO Tim Cook spent “hours” teaching him how to use his new iPhone 11.
You can read Berkshire Hathaway’s full annual letter here.
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