When Warren Buffet speaks, investors listen. And Berkshire Hathaway’s Q3 results released on 15 November were no exception. The update highlighted that Buffett had shaken things up. For the three months ended 30 September, he exited his position in a host of stocks including General Motors, Johnson & Johnson, and Proctor & Gamble, to name a few. He also reduced his stake in Amazon.
I think there’s a lot investors can learn from the famous investor. First of all, he’s been in the game for decades. And along the way, he’s provided plenty of good advice. On top of that, his record speaks for itself. Since becoming CEO of Berkshire Hathaway, he’s averaged a 20% return a year. Now that’s impressive.
The latest results give us a small insight into how Buffett views the market right now. But I’m not looking for stocks he’s decided to axe. Instead, I’m focusing on another pick.
Buffett’s top pick, Apple (NASDAQ: AAPL), needs no introduction. The brand has grown to become one of the largest on the planet. And with that, it’s no surprise the stock makes up 48.6% of Berkshire’s portfolio.
I believe there’s one main reason Buffett is so bullish on it and it’s that Apple aligns perfectly with his mantra of investing in companies we understand. He once stated that investors should be able to write down on a ‘yellow pad’ exactly why they plan to invest in a company. And for Apple, this couldn’t be clearer.
With around 1.5bn people (or nearly 20% of the world’s population) using its products, the value of the business is easy to see. On top of that, the company is very efficient at keeping consumers within its ecosystem. A recent survey by investment bank Piper Sandler showed that 87% of US teens own an iPhone. What’s more, 88% expected an iPhone to be their next phone.
Now, it’s not all plain sailing with Apple. The greatest challenge it’s facing is inflation. Not only has it driven up costs, but it may also deter consumers from pushing the boat out with the latest products.
Its latest results may hint at this. For Q3, revenue fell 1% to $81.1bn, with iPhone sales falling from $40.6bn to $39.6bn.
However, to combat this, it has turned to non-core products. For example, Q3 saw its services sector deliver record revenue, with over 1bn paid subscriptions. The launch of its VR headset has also plenty of market spectators hyped.
A stable dividend
The stock also provides a steady dividend yield. At around 0.5%, it’s not the most attractive out there. However, it has grown over the last five years. For Buffett and his 915m shares, this equated to a payout of nearly $900m in 2022.
I like Apple a lot. Its value is easy to understand. And with it diversifying its revenue streams, most recently seen with through its deal with Major League Soccer, I think the business can continue to go from strength to strength.
I already own the stock. However, if I had spare cash, I’d be keen to pick up some more shares.