Buffett Goes Big on AAPL Stock
Apple Inc. (NASDAQ:AAPL) got a surprise lift on Monday when investors heard that Warren Buffett’s fund had bought $1.069 billion worth of AAPL stock. (Source: “Berkshire Hathaway 13F Filing,” Securities and Exchange Commission, May 16, 2016.)
Shares of the smartphone maker jumped 2.5% in reaction to the news. Buffett is notoriously averse to technology stocks, meaning that he must see something special in Apple’s valuation. The company hasn’t exactly been popular lately.
AAPL stock has been in a nosedive since its most recent earnings report. The company revealed a massive drop in demand from China, as well as a slowdown in “iPhone” sales.
Investors took the numbers to mean that Apple’s glory days were over. AAPL stock plunged approximately 14.5% between the earnings report and last Friday. Apple even lost its place as the world’s most valuable company.
But Warren Buffett’s approval could move markets. Investors will be sure to re-evaluate the stock now that Berkshire Hathaway has placed a $1.0-billion bet on AAPL.
The last technology company Buffett touched was International Business Machines Corp.
When asked why he made an exception to his famous rule, Buffett explained that IBM was no longer a tech stock. He said its business had shifted to IT servicing and that was something he could get behind. Perhaps he sees something similar in Apple.
As the smartphone market reaches saturation, Apple has been pivoting away from manufacturing. It is placing more focus on services like “Apple Pay” and “Apple Music.”
Buffett may be betting on those particular aspects of AAPL stock, but only time will tell if he is right. Shares of IBM have fallen 20% since he discussed the position on CNBC five years ago. He admits that even he, the “Oracle of Omaha,” can be wrong sometimes.
“We’ve owned stocks that we’ve lost money in,” Buffett said on CNBC. “If I’m wrong, you sell them out and take a big loss. We’ve done that on a few occasions with stocks and bonds over the years.” (Source: “Warren Buffett: Buying IBM a mistake? Don’t think so, but…,” CNBC, February 29, 2016.)