If you’re a fan of Warren Buffett and you pay attention to the shares he buys and sells through his company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), you will probably be aware that Buffett is a huge fan of Apple Inc (NASDAQ: AAPL) stock.
Apple is one of the most famous companies in the world, known around the globe for its iPhone lineup, as well as its plethora of other popular products, including the Mac and iPad.
This company also happens to currently be the world’s largest company by market capitalisation, having recently nabbed the crown of the first company to command a mind-blowing market cap of more than US$3 trillion.
Apple is one of Warren Buffett’s favourite investments, despite being one of the shares he has only recently started buying. Buffett has owned American Express shares, for example, since the 1960s. But he only bought Berkshire’s first Apple shares in 2016.
As such, it might shock you to learn that Apple is now Berkshire’s largest investment. And by a mile. According to CNBC’s Berkshire portfolio tracker, Berkshire today owns roughly 915.56 million shares of Apple, with a value of just over US$175 billion. This means that Apple makes up a massive 46.7% of Berkshire’s entire stock portfolio. Its next-largest holding is Bank of America, at a measly, by comparison, 8%.
One of Buffett’s most famous investments is Berkshire’s stake in Coca-Cola Co., But even though Buffett first bought Coke stock in the 1980s, it only commands Berkshire’s third-largest position, at 7.1% of the portfolio.
Why has Warren Buffett put half of Berkshire’s portfolio in one stock?
So Buffett has almost half of his share portfolio in one single stock. This might shock many investors who are used to hearing of the benefits of ‘diversification‘. This would generally be considered to be poor investing practice by many investors.
But who are we to argue with Buffett? This is a man who has perhaps one of the best investing track records in history, having compounded Berkshire’s share portfolio at around 20% per annum for more than six decades.
Indeed, Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing”. Buffett clearly does, hence his bet-the-house move with Apple.
But why Apple as Berkshire’s number one investment? Well, most of us would recognise the phenomenal commercial power of this company. Apple has long had one of the most powerful brands in the world. It is known for its quality products and the wide and inviting ecosystem in which they sit.
Buffett was actually asked this very question at Berkshire’s 2023 annual shareholder meeting. Here’s some of what he said:
Apple… just happens to be a better business than any we own.
And we put a fair amount of money in it, but we haven’t got more money in it than we’ve got in the railroad. And Apple is a better business. Our railroad is a very good business. But it’s not remotely as good as Apple’s business. Apple, you know, has a position with consumers where they’re paying, you know, maybe the $1,500 bucks or whatever it may be for a phone.
And these same people pay $35,000 for having a second car. And if they had to give up a second car or give up their iPhone, they’d give up their second car. I mean, it’s an extraordinary product. We don’t have anything like that that we own 100% of.
So there you have it, why Buffett has staked so much of his company’s capital on what he clearly thinks is the best business in the world. We mere mortals might not be rushing to emulate his strategy, but it certainly is an interesting case study.
