Warren Buffett is one of the greatest investors of all time. Through smart bets, Buffett has become one of the richest people in the world. He has also donated billions to charity in the process.
Buffett’s career has seen a number of big successes, ranging from his company, Berkshire Hathaway, buying a considerable part of Coca-Cola, to buying all of insurer Geico.
Given Warren Buffett’s history, here are three investing techniques and strategies that make him so highly regarded and they all relate to his Apple (NASDAQ: AAPL) stake.
Warren Buffett’s Apple purchase
Although he isn’t best known for buying tech company shares, Berkshire Hathaway famously has made tens of billions of dollars on the purchase.
The company initially bought some shares of Apple through the decision of one of his lieutenants in 2016. Later, Warren Buffett himself made the decision to buy Apple for Berkshire Hathaway in a big way. As a result of his purchases and Apple’s stock rise, Apple is one of his company’s largest holdings. In fact, Berkshire Hathaway’s Apple stake was worth $91.3bn around the middle of this year.
So what does this show us?
First, I think it shows how Warren Buffett is willing to adjust. Given the new digitally interconnected landscape, value investing in old industry isn’t the only path to success these days. Investing in technology companies with attractive growth potential, competitive advantages, and great management can also work.
Second, it reinforces Buffett’s quote belief that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” At the time of his purchase, the stock wasn’t seen as ‘cheap’ in many investors’ eyes. Before Buffett bought the stock, Apple had already been on something of a tear from the time when the company launched its wildly successful iPhone.
Future trends
Third, I think it shows how Warren Buffett is smartly positioning his portfolio to take advantage of potential future trends.
In terms of future trends, many analysts think 5G and AI will be key. Indeed, according to ABI Research, market data suggests 5G/AI will lead to the creation of around $3.1trn worth of annual value in 2025. Of that amount, 41% could be driven by direct sales from the 5G value chain, which includes consumer subscriptions.
Given that Apple now sells 5G phones, the company is well positioned to take advantage of the trend, in my view. As AI advances and as 5G proliferates, I also think Apple could make even more money from its App Store. That could happen as developers create new apps that take advantage of those technologies.
In terms of potentially benefiting from Buffett’s strategies, I’d follow him by investing in Apple and holding for the long term. I wouldn’t buy Apple in isolation, however. I’d also buy the basket of ‘S&P 5’ stocks aside from Apple — including Amazon, Microsoft, Alphabet, and Facebook — and holding for the long term.
Although regulation could be a headwind, I think these collective stocks could still do well. I believe the collective stocks benefit from positive long-term trends.
