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My top Warren Buffett stock for 2022

Buffett at the BRK AGM
Image source: The Motley Fool

What is it about Warren Buffett that seems to give him the Midas touch when it comes to selecting shares? The so-called Sage of Omaha has been buying and holding some incredible shares for decades. Among his current holdings, there’s one I fancy adding to my portfolio for 2022 and beyond.

Warren Buffett’s biggest holding

The share in question is actually Buffett’s biggest holding. He has over $100bn of the company’s shares at the moment, suggesting he remains bullish about its outlook though he did trim the position slightly last year. Even that move was one he publicly lamented at this year’s shareholder meeting of his company Berkshire Hathaway.

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The shares in question are those of Apple (NASDAQ: AAPL). The tech giant had been on Buffett’s radar for years, but it was only in 2016 that he started his position. An initial $1bn was relatively modest compared to what he later put into Apple. But it’s worth remembering that, in 2016 as now, not everyone shared Buffett’s bullishness on the tech giant. Some commentators reckoned that the company had run out of innovative capability and was overvalued. The same concerns can be heard today.

Why Apple for 2022?

There are some grounds for concern that Apple has lost its way when it comes to being a tech innovator. After all, the core product offering has grown only sluggishly in recent years. The key smartphone market also looks more crowded than it did a few years ago.

But Apple’s performance is strong. Last year’s revenue of $365bn was an all-time high. So too was its net income of $95bn. Moreover, those numbers show the sheer scale of the business. Apple made an average of $1bn in revenue every day of the year. Plus it was able to convert that into profits at an attractive margin. I think that shows the wisdom in the company’s strategy of changing its portfolio only a little at a time. Focusing on a limited number of products and services reduces operating complexity. That can improve profit margins.

With its entrenched user base and well-established ecosystem, I reckon Apple will continue to be a money printing machine for years to come. In 2022, if it can prove the continued resilience of its business model as it did last year, I expect sentiment on the shares to stay positive. That could fuel further gains in the Apple share price.

Share price risks

That doesn’t mean there aren’t risks, though. Supply chain issues could hurt Apple like other semiconductor users, threatening revenues and profits. An economic tightening in many markets could lead to falling demand for the company’s costly products.

Additionally, the shares have already seen significant price increases in 2021. Over the past year, Apple shares have put on 40% at the time of writing this article late yesterday. That could suggest that the shares are overvalued. But given Apple’s strong brand, established ecosystem and favourable economics, I think it will maintain substantial pricing power into the future. I would consider buying it for my portfolio now and holding it in 2022 and beyond.

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Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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