Billions in value have been wiped from the books since Apple reported a sizeable drop in iPhone sales in last April. The reason for the uptick?
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The stock market got off to a good start to the week Monday, amid the “Buffett Bounce” or the “Apple Rally”, or whatever you want to call the Dow’s 175-point surge driven by news that billionaire investor Warren Buffett’s Berkshire Hathaway took a roughly $1 billion position in iPhone maker Apple last quarter.
In a regulatory filing detailing most of its stock holdings, Berkshire said it held 9.81 million Apple shares worth US$1.07 billion as of March 31.
Buffett’s investment arm does not usually opt for tech stocks, typically going for “value stocks”, so this latest purchase has come as a bit of a surprise.
Warren Buffett himself is believed not to have played a direct role in the decision to invest some of Berkshire Hathaway’s cash in Apple, according to a WSJ report.
Buffett also recently revealed that he is willing to help Dan Gilbert, the billionaire founder of Quicken Loans, finance a bid for Yahoo’s internet business. Apple’s price, however, has since fallen further, to about $90 per share, though it quickly shot up to $93 following the news of the billion-dollar purchase. After all, Apple’s stock was at $130 a share nearly a year, so if Buffett had bought up Apple then, he would be looking at an nearly 28 percent drop in his investment. “There are new investors – it used to be growth and high-risk investors, now it’s more value and return on capital”. Most investors are best off taking Buffett’s own advice: Own an index fund. Buffett’s record has been built on investments in insurers, financial companies and industrial businesses, including companies like Coca-Cola Co. and American Express Co. Icahn made his initial investment, reported to be worth about $1.5 billion, in 2013. Icahn said last month that he had sold his big stake, telling CNBC at the time that Apple is a great company but no longer a “no-brainer” as an investment choice. Berkshire slightly increased that stake again in the first quarter of 2016. That’s really chump change to someone like Warren Buffett, so my guess is that he sees Apple has very undervalued and expects the stock to recover much of its real value at some point in the future.
He didn’t say which manager picked Apple.
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Other moves Berkshire made include selling 99% of its stake in Procter & Gamble Co.to just 315,400 shares, trimming its stake in Wal-Mart Stores Inc.by 1.7% to 55.2 million shares.
