With 2024 in sight, I’m already thinking about what financial objectives I want to achieve in the next 12 months. Whenever I’m in need of some inspiration for my investments, I tend to turn to Warren Buffett.
The ‘Oracle of Omaha’ is one of the best investors alive today. He started at age 11 with a small sum. Today, his fortune sits at an impressive $120bn. That’s no mean feat. Many have tried to replicate his performance and failed.
That said, could I see success if I just copied Buffett’s investments? With that, I’m looking at Berkshire Hathaway’s portfolio.
Top holding
If I can’t beat Buffett, should I just join him? His top holding is Apple (NASDAQ: AAPL), which makes up nearly half of Berkshire’s portfolio. Should I buy some shares today?
Well, there’s an argument to be made. To start, Apple stock has had a terrific year, rising 58%. With that, it’s no surprise Buffett labels it the backbone of his portfolio.
What I most like about Apple is its strong grip on the market. Nearly 20% of the world’s population uses its products. On top of that, the business is highly efficient at keeping consumers in its ecosystem. A recent survey by investment bank Piper Sandler showed that 87% of US teens own an iPhone. Additionally, 88% expected an iPhone to be their next phone.
That being said, the biggest threat to the business is inflation. A cost-of-living crisis may see consumers cut back on upgrading their devices. Revenue falling 2.8%, to $383.3bn, compared to the year before, may reflect this. On top of that, ongoing geopolitical tensions in China as well as competition from Huawei could prove to be an issue.
But Apple is diversifying its revenue streams to combat this. For example, its services business posted record revenues in 2023. During the year it generated $85.2bn in sales, a 9% jump from 2022. This was fuelled by growth in services such as Apple TV+.
The stock also provides a dividend yield of around 0.5%. And while this isn’t extraordinary, it’s certainly consistent. Apple has paid a dividend for the past 11 years. It’s also looked to create more value for shareholders in recent times, including returning $25bn in Q4 via share buybacks.
Taking Buffett’s advice
I’m a fan of Apple. And while I’d follow Buffett in buying the stock, if I had the cash, I wouldn’t follow him blindly with all his investments. Instead, I’d remember a key piece of advice he once offered. That’s to understand the company you’re buying.
Buffett often spends many hours going through hundreds of pages of company reports before he decides to invest in a business. If he doesn’t understand it, he won’t buy it. He proved this when he passed on Google and Amazon due to a lack of knowledge of the internet industry.
Now, I’m not saying I’m as much of an expert as Buffett. And it’s difficult for us retail investors to devote as much time as he does to research. However, with all my investments, I take time to understand the business. I see this proving to be more fruitful than copying Buffett blindly.
