Billionaire investor Warren Buffett’s big bet on Apple has paid off handsomely, earning him more than $120 billion on paper as the tech giant reached a $3 trillion market valuation this week.
Berkshire Hathaway began buying Apple stock in 2016, and by mid-2018, the conglomerate had acquired 5% of the company for $36 billion. That $160 billion investment by Apple will be worth a whopping $160 billion in 2022.
The iPhone maker also pays out dividends to its shareholders, with Berkshire receiving an average of $775 million per year.
Investing in Steve Jobs’ brainchild wasn’t always on Buffett’s radar, despite Apple’s clear and sustained growth; historically, the “Oracle of Omaha” has been wary of heavy-hitting tech stocks, but that’s changed in recent years.
According to InsiderScore.com calculations, Berkshire’s Apple stake now accounts for more than 40% of its equity portfolio, and Buffett has referred to the company as one of Berkshire’s largest businesses, ranking third only to its insurance and railroad holdings.
Buffett has described the iPhone as a “sticky” product, one that keeps customers returning on a regular basis. “[Apple] is probably the best business I know in the world,” . “I don’t consider Apple to be a stock. It’s our third business, in my opinion.”
Buffett frequently asserts that appreciating stocks can fluctuate further and thus aren’t yet real gains, but Berkshire has realized some of its Apple-investment profit; in 2020, the conglomerate sold off some of its holdings and received $11 billion.
However, Apple’s ongoing share repurchases have maintained the company’s healthy growth and increased Berkshire’s total stake in the company. “Berkshire Hathaway’s investment in Apple vividly demonstrates the power of repurchases,” the conglomerate said in its 2020 annual report.
“Regardless of that sale [in 2020], Berkshire now owns 5.4 percent of Apple.” That increase came at no cost to us because Apple has consistently repurchased its shares, significantly reducing the number of shares it now has outstanding.”