Warren Buffett’s Berkshire Hathaway Inc. published its highly anticipated annual letter this morning, offering details of the conglomerate’s investments in 2020. In this year’s letter, Buffett praised that Apple is considered the largest investment in Berkshire common stock, although the conglomerate sold 9.81 million AAPL shares at the end of 2020.
Warren Buffett on AAPL:
Buffett considers AAPL an action that “vividly illustrates the power of repurchases”. Berkshire started to acquire Apple shares in late 2016 and currently holds $ 120 billion in shares, at a cost of $ 31.1 billion.
Berkshire’s investment in Apple clearly illustrates the power of repurchases. We started buying Apple shares in late 2016 and in early July 2018, we owned just over one billion Apple shares (adjusted for the split).
When we finished shopping in mid-2018, Berkshire’s general account held 5.2% of Apple.
Buffett also says that Berkshire sold a small part of its stake in AAPL in late 2020, pocketing $ 11 billion. Because of Apple’s repurchases, however, which reduce the total number of shares outstanding, AAPL’s Berkshires ownership increased to 5.4%, despite the sale:
Since then, we have received regular dividends, on average about $ 775 million annually, and have also – in 2020 – pocketed an additional $ 11 billion by selling a small part of our position.
Despite this sale – voila! – Berkshire now owns 5.4% of Apple. This increase had no cost to us, because Apple continually repurchased its shares, substantially reducing the number it now has in circulation.
This also benefits Berkshire shareholders, explains Buffett in the letter:
But that is far from good news. As we also repurchased Berkshire shares for the 21⁄2 years, you now indirectly own 10% more of Apple’s future assets and earnings than in July 2018.
How Bloomberg reports, Buffett resisted buying Apple shares for years because he said he couldn’t understand the tech company. Working with investor MPs Todd Combs and Ted Weschler, however, Berkshire has expanded and has since added other technology companies such as Amazon and Verizon.
AAPL is now one of Berkshire’s three most valuable assets, aligning with its insurers and BNSF Railway, the American railroad that buys the conglomerate completed in 2010.
Still, although Berkshire Hathaway is a major investor in Apple, Warren Buffett himself switched the flip to the iPhone last year. Buffett said at the time that Apple CEO Tim Cook spent “hours” teaching him how to use his new iPhone 11.
You can read the full annual letter from Berkshire Hathaway here.
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