Warren Buffett and Berkshire Hathaway Inc. published its highly anticipated annual letter this morning detailing the conglomerate’s investments in 2020. In this year’s letter, Buffett claims that Apple is the largest investment in Berkshire, although the conglomerate sells 9.81 million shares of AAPL at the end of 2020.
Warren Buffett on AAPL:
Buffett cites AAPL as a stock that gives the power of repurchases a clear illustration. Berkshire only started acquiring Apple shares in late 2016 and currently owns $ 120 billion in the stock, at a cost of $ 31.1 billion.
Berkshire’s investment in Apple illustrates the power of buybacks in a clear way. We started buying Apple shares in late 2016 and started July 2018 with just over one billion Apple shares (shared-adjusted).
When we finished purchasing in mid-2018, Berkshire’s general account owned 5.2% of Apple.
Buffett also says that by the end of 2020, Berkshire had sold a small portion of its AAPL stake, with $ 11 billion in its pocket. However, due to Apple’s repurchase, which reduces the total number of outstanding shares, Berkshires’ ownership of AAPL rose to 5.4% despite the sale:
Since then, we have both enjoyed regular dividends, averaging about $ 775 million a year, and we have also – in 2020 – pocketed another $ 11 billion by selling a small portion of our position.
Despite that sale – voila! Berkshire now owns 5.4% of Apple. The increase was free of charge for us, as Apple constantly repurchased its shares, significantly shrinking the number now outstanding.
It also has benefits for Berkshire shareholders, Buffett explains in the letter:
But this is by no means all the good news. Because we also repurchased Berkshire shares during the 21⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018.
As Bloomberg reported, Buffett resisted for years buying Apple shares because he said he did not understand the technology company. However, Berkshire has expanded along with investment delegates Todd Combs and Ted Weschler and has since added other technology companies such as Amazon and Verizon.
AAPL is now one of Berkshire’s top three most valuable assets, joining its insurers and BNSF Railway, the US railway procurement that completed the conglomerate in 2010.
Nevertheless, although Berkshire Hathaway is a major investor in Apple, Warren Buffett only switched from a mobile phone to the iPhone last year. Buffett said at the time that Apple CEO Tim Cook had spent “hours” teaching him how to use his new iPhone 11.
You can read the full Berkshire Hathaway annual letter here.
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