My favourite Warren Buffett stock for 2022

Of all the Warren Buffett stocks he has considered for his portfolio in 2022, this is the one that Christopher Ruane is most excited about.

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Image source: The Motley Fool

Investing legend Warren Buffett has been buying shares for decades. He has made some spectacularly good choices over the years (along with some poor ones). Right now there is one Warren Buffett stock I am particularly excited about for this year. I am considering adding to my own portfolio for the continued strong growth prospects I believe it has.

Tech giant

The stock in question is Apple (NASDAQ: AAPL). The company this month became the first to hit a market capitalisation of three trillion dollars, showing what a giant it has become. Since then it has been caught up in the broader tech sell-off and the Apple share price has fallen. Despite that, it is still 16% higher than it was a year ago.

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In fact, one of the reasons I am so enthusiastic about Apple is its ability to confound its critics. For years, bears have been arguing that the company is overvalued. They point to rising competition from other mobile phone makers. Apple’s perceived lack of innovation is seen as a threat to future profitability. Political risks to its supply chain could also hurt revenues.

Yet despite all of those risks, Apple just keeps powering on. Last year, revenues soared by 33% to $366bn. The operating income of $95bn means that Apple was earning close to $2bn a week. To put those figures into context, last year Apple earned in around 11 days what two leading UK telecoms companies Vodafone and BT earned all year from their entire businesses.

Future outlook

Past performance is not a guide to the future, however. But I remain optimistic about the outlook for Apple. It has a large entrenched customer base, a premium brand that gives it pricing power and an ecosystem that encourages existing customers to increase their spending with the company. Like Warren Buffett, I think all of those things could help Apple maintain strong earnings for years or even decades to come.

This week the company released its first quarter earnings statement. Revenue grew 11% compared to the same quarter last year. Net quarterly profit per diluted share was up 25%. That sort of strong growth suggests that the Apple ecosystem is a source of ongoing competitive advantage that could help future earnings. Services now account for almost 16% of the company’s revenues. As that figure increases, it reduces the company’s reliance on selling more iPhones to boost revenues.

I would consider buying this Warren Buffett stock

Buffett’s holding — 5.4% of Apple – is now worth $144.5bn compared to the $31bn he paid for it. That is a phenomenal gain. But amazingly, Buffett did not achieve that by getting in early with Apple. In fact, he only started buying the shares in 2016.

That gives me hope that I can also benefit from continued success at Apple by adding it to my portfolio, like Warren Buffett.

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Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple and Vodafone. 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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