Why I’d follow Warren Buffett and buy this stock today!

Apple makes up over half of Warren Buffett’s Berkshire Hathaway portfolio. Here, this Fool explains why he would also buy the stock now.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Fans of Warren Buffett taking his photo

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett is renowned for his quotes. Over his long and successful investment journey, Buffett has always liked to buy quality stocks for a cheap price. For example, amid the devastating financial crash back in 2008, he famously quoted in a letter to Berkshire Hathaway shareholders how “whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”.

With 2022 having seen big falls in the stock market so far (for example, the US S&P 500 is down 22% year-to-date), here’s why I’d follow Warren Buffett and buy Apple (NASDAQ: AAPL) stock today. It’s by no means a cheap stock, but it is marked down at the moment.

Apple share price history

Long-term investors in Apple have seen strong results over time. Following the firm’s rise, the last five years have seen its share price rocket by 275%. In fact, Apple has risen over 1,300% in the last decade. However, the stock has failed to repeat this form in 2022. It’s down 26% year-to-date. Despite a 7% rally in March, the share price has struggled to take off this year.

Apple shares make up nearly half of Berkshire’s stock portfolio. And amid its fall, Buffett has rushed to purchase more shares in the tech giant. At the end of March 2022, Berkshire had nearly $160bn worth of Apple shares.

Apple opportunities

With this fall, I think, just like Buffett, that Apple could be a strong addition to my portfolio. One reason for this is the firm’s buyback scheme. Led by CEO Tim Cook, in recent times the business’s performance has been boosted by the programme. Companies buy back their own stock for a variety of reasons, with one being to increase value for shareholders. Last year alone, Apple spent over $85bn on buying back shares.

Also, the current Apple share price can be seen to provide value from some viewpoints. Buffett has previously said that “the important thing is to know what you know and what you don’t know.” Essentially, what he means by this is that investments should be understandable. And with over a billion people using Apple devices across the world (myself included), it’s clear to see the useful services that Apple provides and to understand why it’s popular.

Apple risks

With this said, there are a few concerns I have with this stock.

Firstly, it’s currently trading on a price-to-earnings ratio of around 22. While it has been higher in times gone by, this is still not cheap.

Apple may also suffer from the cost-of-living crisis. With everyday life becoming more expensive, the business may see a slow in demand as consumers shy away from purchasing new expensive goods. This would no doubt impact the share price.

Why I’d buy

Despite this, I still deem Apple a buy. Although it could see a drop-off in demand, I think it holds such a strong position in the market this is unlikely. And along with the firm’s buyback scheme, I think the company is in a strong position to bounce back. Just like Buffett, I would buy Apple shares today for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Keough 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »