Berkshire Hathaway began buying Apple’s stock in 2016 and amassed a 5% ownership of the iPhone maker by mid-2018 with a cost $36 billion. As the tech giant’s share price skyrocketed, the value of Buffett’s bet has ballooned to more than $160 billion, bringing his return well over $100 billion on paper in just six years.
The highly lucrative investment reminded some Buffett watchers of Coca-Cola, the Oracle of Omaha’s oldest and longest stock position. The consumer juggernaut’s stock has soared over 2,000% since Buffett started buying in 1988, and it’s still Berkshire’s fourth largest equity position with 400 million shares.
“Buffett is having his Coca Cola moment on Apple,” said Bill Smead, chief investment officer at Smead Capital Management and a Berkshire shareholder. “They both went way up the first five to seven years he’s owned them.”
Investing in high-flyers like Apple seemingly defies Buffett’s well-known value investing principles, but the out-of-character move turned out to be his best investment over the last decade. Apple’s stake also played a crucial role in helping Berkshire weather the coronavirus pandemic as other pillars of its business, including insurance and energy, took a huge hit.
The 91-year-old investor has become such a big fan of Apple that he now considers the tech giant as one of the “four giants” driving his conglomerate of mostly old-economy businesses he’s assembled over the last five decades.
Apple “has been a homerun for Berkshire, no doubt,” said James Shanahan, Berkshire analyst at Edward Jones. “Buffett acquired most of the position at an average cost of about one fourth of the current market price.”
Apple’s stock repurchase strategy also allows the conglomerate’s ownership to increase with each dollar of the iPhone maker’s earnings. Berkshire has trimmed the position, but its ownership still crept up from 5.27% at the end of 2020 to 5.43% at the end of last year.
The conglomerate has also enjoyed regular dividends from the tech giant over the years, averaging about $775 million annually.
If one were to take cues from what Buffett said when he first purchased Coca-Cola shares, it wouldn’t be a far-off guess that the investor is in Apple for the long haul.
“In 1988 we made major purchases of Federal Home Loan Mortgage and Coca Cola. We expect to hold these securities for a long time,” Buffett wrote in his 1988 annual letter. “In fact, when we own portions of outstanding businesses with outstanding managements, out favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well…”