Since the late 1950s, Warren Buffett and his team have transformed Berkshire Hathaway from a struggling textile manufacturer to a holding company with a market capitalisation greater than $460bn. Apple (NASDAQ: AAPL) shares now comprise around 20% of Warren Buffett’s portfolio with Berkshire Hathaway owning $91.3bn worth of AAPL stock.
Put another way, Buffet is a believer in the future of the Cupertino, California-based tech titan. Year-to-date, Apple shares are up around to 35%. But that metric tells only half the story. On 23 March, AAPL stock hit a recent low of $212.51. Now it’s hovering at $395. So since then, AAPL stock is up an eye-popping 85%. I think UK investors may also share Mr Buffett’s enthusiasm regarding AAPL.
Why Buffett loves Apple shares
Earlier in the year, Buffett released his annual shareholder letter. He believes stocks will most likely beat bonds over long term if interest rates stay low.
In the US, the Federal Reserve has slashed interest rates to record low levels in recent months as part of its efforts to ease the economic effects of the pandemic. Apple shares remain Berkshire Hathaway’s largest holding and part of Buffett’s conviction regarding them links to that view that broader markets will outperform most other asset classes.
Buffett’s typical preferred investments are
- Large-cap stocks
- Consumer brands
- Financials, including banks and insurance companies
- Stocks that pay dividends
In August 2018, Apple became the first US-based company to hit a $1trn valuation. Currently the market-cap is over $1.7trn. By comparison, Microsoft and Amazon each have market-caps of about $1.6trn. On a side note, all three companies have been crucial in driving broader US markets higher since March.
With such a market-cap, it would be safe to assume that Apple shares are unlikely to be held down by the market for too long, even in uncertain times brought on by Covid-19. The Street and Warren Buffett regard large market-cap companies as good and stable long-term investments.
Although most market participants think of Apple as a tech company, Buffett views it as a compelling consumer business thanks to its popularity worldwide. In a recent interview he said: “I do not focus on the sales in the next quarter or the next year. I focus on the … hundreds, hundreds, hundreds millions of people who practically live their lives by [iPhone]… It’s probably the best business I know in the world”.
Apple controls over 50% of the US smartphone market. Many analysts agree that 5G will likely turbocharge its stock price in the coming months too.
APPL is the cornerstone of Warren Buffett’s portfolio. If you also share his views and would like to buy Apple shares, you may want to talk to you financial advisor about their suitability for your risk/return profile. There may also be tax implications of owning foreign shares. Once you’re ready to hit the ‘buy’ button, you should typically be able to buy the stock through your broker.
Alternatively and very easy, there are UK-based exchange-traded funds (ETFs) that include Apple as a holding. They include the AXA Framlington Global Technology Fund, Herald Investment Trust, iShares S&P 500 Information Technology Sector UCITS ETF USD, and Polar Capital Technology Trust. These funds would enable UK investors to take a bite out of Apple shares as well as other technology stocks.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Berkshire Hathaway (B shares), and Microsoft and recommends the following options: long January 2022 $1920 calls on Amazon, long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short September 2020 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short January 2022 $1940 calls on Amazon. 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.