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Warren Buffett Buys $1 Billion Stake In Apple (cnn.com)
An anonymous reader quotes a report from CNN: Berkshire Hathaway, the conglomerate run by Buffett, disclosed in a regulatory filing Monday that it purchased more than 9.8 million shares in Apple during the first quarter. It marks Berkshire's first investment in Apple. Berkshire acquired its position at an average price of about $109 a share. Apple's stock price has since fallen to just above $90, meaning that Berkshire's stake in Apple is now worth about $888 million. The Apple purchase is the second big tech investment by Berkshire, which has been steadily adding to its stake in IBM during the past few years. Until recently, Buffett had been famous for his lack of investments in the tech sector. But Apple fits perfectly in Buffett's wheelhouse. The company is a leader in its market and the stock is extremely cheap, trading for just 11 times this year's earnings estimates. Apple also has a pristine balance sheet, with $232.9 billion in cash. At the end of April, billionaire investor Carl Icahn sold his entire stake in Apple, citing the risk of China's influence on the stock. Last week, Didi, China's ride-sharing service and rival to Uber, announced Apple invested $1 billion in the company. There's been a lot of money shuffling taking place as of late as Apple tries to reinvigorate the market after it had its first earnings decline in more than a decade.
How does this affect me? Why should I care that some guy who has hundreds of times more money than I ever will has bought a $1 billion stake in Apple? Why is this important to anyone except Warren Buffett? I'll get modded down to -1 for asking this because Slashdot users don't like answering important questions. But this needs to be asked, and I challenge any of you to give me a real answer rather than insulting me. Unfortunately, I don't think anyone here is up to the challenge.
It was one of his fund managers. They have complete autonomy when buying and selling stocks. I guess with a transaction this large, it's likely that Buffett was made aware of it but he's not the guy that pulled the trigger.
Well, that is why he is a billionaire and I am a code monkey.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Back in the day, Buffet would not buy companies he does not understand. In other words, he never bought 'tech' companies. Now just in the last few days we find out he owns a chunk of Apple and is in second round of bidding for Yahoo. With his advance age, this makes me think he is no longer controlling all major day to day investments at Berkshire Hathaway.
http://www.businessinsider.com/why-buffett-doesnt-invest-in-technology-2014-3
Interesting video here--> https://goo.gl/lsLJUh
Does this name remind anyone else of Darda cars? I'd take one of those as a taxi.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Buffy buries stake in Apple.....
Apple is on its way down unless they can find some new product lines.I think this is going to be one of his (few) losers.
My assumption is that Buffett thinks that technology is becoming commodity, Apple is a big brand consumer company, and that he understands consumer commodities. However, Apple still depends on its technology/manufacturing development to give it what little zing it has left and that this will come around and bite him in the ass. Wait for two or three new products to crash and burn in the market and/or manufacturing development. Apple's brand is getting a bit long in the tooth to be trendy anymore, as well.
I think we'll be watching Warren riding this thing down.
That is all.
Still stuck to my "never an individual stock. Always funds. Always index funds".
Nothing wrong with that. You might leave some money on the table (or not) but you should stick with an investment strategy that fits your appetite for risk. Index funds are fine investment vehicle. Don't apologize for using them.
Personally I haven't purchased AAPL for a different reason. Three reasons actually. First the stock is already quite valuable so the chance for it to double is not as high as with some other companies. Yes the PE is still reasonable but that is predicated on profits remaining where they are which is to say VERY high. Second, the dividend yield on AAPL isn't amazing, currently at about 2.4%. While that's not bad it isn't better than inflation so I'd still be depending on stock growth to make any money. Compare with companies like Royal Dutch Shell which pay 7-8% dividend yield and are less subject to consumer whims. Third and probably most important, Apple's product strategy is kind of a high wire act. All it would take for the stock price to crater would be a single bad iPhone. While Apple has a great track record, they aren't free from screwups. Apple's stock price remaining high will depend on them introducing another hit product in the next 5-10 years. Unclear if they will be able to pull that off without their visionary leader.
For a tech stock I think AAPL isn't a terrible investment but I think AMZN has more upside potential as a stock if you want to play in that sector and are thinking a few years down the road.
....rides off on his high horse
Apple's stock is undervalued currently. Just because they had a lag in growth the insanity of endless growth demanded by Wall Street caused the stock to dip. There will be some slow downs and dips it's completely normal. Doesn't mean Apple won't hit one out of the park that takes everyone by surprise. Apple is cash rich and has tremendous R&D. It was an excellent buy opportunity for those with the ready capital to invest. I am still kicking myself for not buying 1,000 shares when it was $9 a share! I knew they were going places after Jobs return, I had just bought a Titanium PowerBook with the first public release of OS X as an option (came pre-loaded with MacOS 9). I bought it specifically because I was familiar with NeXTStep/OpenStep. Course it would have helped to have $10,000 to burn which I did not have at the time...
Buffet doesn't play the stock lottery. That is, he doesn't try to make money off of the appreciation in stock price from when he buys it to when he sells it. He concentrates on acquiring stocks of companies which he feels are solid long-term investments, and will allow him to make money off the dividends they pay.
Jobs hated paying dividends. Apple stopped paying them in 1995 to entice him to return to the helm, and didn't start paying them again until late-2012 after Jobs died. (For those who don't know, dividends are profits distributed to shareholders. Under Job's watch, Apple kept all its profits as retained earnings, making AAPL what's playfully called a baseball card stock. That is, a stock which doesn't pay dividends, so whose only value is being able to impress dinner guests by showing them that you own it, and how much you can get selling it to someone else. Google is still a baseball card stock - they don't pay dividends either.)
The $232.9 billion Apple has in the bank almost exactly matches its net profit during the time it didn't pay dividends (2005-2015 adds up to $232.78 billion). In other words, rather than paying stockholders dividends or investing the money into R&D and expansion like you're supposed to with retained earnings, Apple has just been putting it into a bank account. Kinda makes me think that was a condition Apple's board put on Job's policy of not paying dividends. Maybe Buffet has a hunch about what they're going to do with the money?
China is now bleeding apple dry for technology. They did the same with GM, GE, Westinghouse, etc.
I prefer the "u" in honour as it seems to be missing these days.
>> Always index funds
> Funds are okay but the fees really add up. I've had good success buying mosting stocks which are in successful funds, avoiding all their fees.
Are you thinking about managed funds, as opposed to the index funds he mentioned? My main index fund, IVE, has an expense ratio of 0.18%. $1.80 per $1,000. If you invest monthly,the mutual fund is probably cheaper on fees than buying individual stocks. Even you buy individual stocks less often (and miss out on growth), transaction fees from the multiple transactions to buy multiple companies could easily be higher than index fund expenses. Plus you save time - no need to keep rebalancing between different companies each month you invest.
Managed funds are an entirely different thing. Expenses ARE frequently high, often high enough that the net return is better with an index fund.
Maybe Buffett thinks that there is lots of money to be made in the automobile industry. Maybe because of the number of orders Tesla received for their new model. One think Apple was able to deliver on was satisfying a huge demand for their product. Which isn't easy and which Tesla now has to prove they can do as well.
Something you and others do not seem to understand is just how many ways Apple is growing.
The primary way is still iPhones. Even though sales year over year are down, ever quarter still means an overall increase of tens of millions of people using new devices.
So then on top of that you have services for all those devices, as Apple said over a billion now - and growing every quarter. That's a lot of app revenue, iCloud revenue, other related revenue increasing and increasing over time..
And that's just the boring stuff we already are laser-focused on. Not even included is the rapidly expanding revenue from AppleTV stuff, or future growth from whom new categories like cars...
Buying Apple stock at this point seems like a pretty easy choice to make, but feel free to invest in vastly more risky choices.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Maybe Mr. Greedy will down with the ship when it sinks.
don't agree. They've had bad iPhones. They've bent over users with updates. It will take a lot more than that to get the iFanboys to switch.
They've had flawed iPhones but not a truly bad one. I'm talking one with flaws so bad it actually affects sales. I'm talking a seriously screwed up device. Something much worse than any problem we've seen so far. Geeks here on slashdot tend to overreact to what in reality are relatively minor missteps by Apple. Antenna-gate for example was a problem but since almost everyone puts their phones in cases anyway it didn't really matter much from a business perspective.
Alternatively the other way Apple could run into trouble would be through margin pressure on the iPhone. It's not hard to envision the smartphone market getting mature like PCs and prices experiencing downward pressure. If Apple can't continue to come up with new features (or can't do it fast enough) people are willing to pay a premium for this will eventually happen. If phones become more commoditized Apple isn't really built to compete on price. I think the margin pressure scenario is actually somewhat more likely than the Bad iPhone scenario but either is a real possibility.
Apple is running into the law of big numbers. There simply aren't a lot of products they can make that can generate enough revenue to grow the company meaningfully. I think Apple hasn't paid enough attention to web services. There's some potential there. I could maybe see them getting into home automation or appliances. We've heard rumors about a car but the auto business is WAY different than consumer electronics (I'm in the auto industry myself) and it's unclear if Apple can develop real competency there. Apple is really a software business with a bit of design competency thrown in. Hard to see that translating gracefully to cars though I suppose anything is possible. I suppose if Elon Musk can figure it out I don't see why Apple couldn't. I think more likely they will end up buying one or more large companies and diversifying their revenue streams to some degree. Right now all their eggs are in consumer electronics but they have the cash to buy their way into other industries for the right price. A telecom (think something like buying AT&T) would be an intriguing purchase and Apple has enough cash to make it happen.
You think they'll finally be profitable in only a few years?
Yes I expect Amazon will eventually show profits. When? I don't pretend to know. They could be profitable tomorrow if they wanted to be though I think that would be a mistake. I think the real profit engine from Amazon will probably be their web services and maybe their media business. Their retail business (the stuff the ship in boxes) is really more of a cash generating engine than anything else. It provides the cash flow to fund these other business lines. But it's a low margin high volume business and it's not inconceivable that competitors like Walmart could catch up to them. So far though Amazon has made it really easy to do business with them and nobody else has managed to match them in online retail.
That said, your concern about profits does have considerable merit. Ideally as an investor you'd like to see them growing AND making profits along the way like Apple has done. But I think in the long run if Amazon doesn't do anything stupid it is a better investment today than Apple.
First the stock is already quite valuable so the chance for it to double is not as high as with some other companies.Yes the PE is still reasonable but that is predicated on profits remaining where they are which is to say VERY high.
I think it's almost certain to double within ten years - simply based on iPhone replacement sales, and services revenue growth alone. The profits seem high, but there's also no reason to look ahead and see them going down much, and a LOT of reasons to think they will go up again in the future. Cars, increase in Watch and TV sales, all are things that can add whole new layers of revenue on top of an already large amount.
Or, the fact that CurrentC just folded, leaving all sorts of high end stores (like Target) to start accepting ApplePay...
Another factor is that Apple is continuously buying back its own shares.
Second, the dividend yield on AAPL isn't amazing, currently at about 2.4%. While that's not bad it isn't better than inflation so I'd still be depending on stock growth to make any money. Compare with companies like Royal Dutch Shell
But you are not factoring in potential downsides to traditional energy stocks which I think are quite large. I think it's just as probable that Shell loses 10% of value over the next ten years as it is that Apple stock doubles... not because of "consumer whims" but because of long term trends in the energy industry.
All it would take for the stock price to crater would be a single bad iPhone.
The stock price has already cratered. Why do you think Berkshire has bought in now? It's because there's very little downside at this point, between a very large cash pile, very astute management, and continued strong execution. Why do you think there's a chance there even MIGHT be a "single bad iPhone"? Apple refines and enhances, so I don't see how that happens.
Apple's stock price remaining high will depend on them introducing another hit product in the next 5-10 years.
Nope. Even if new people stopped buying iPhones today (unlikely in the extreme) replacement and services growth would easily increase revenue (if slowly).
What happens in two years when all of those people that bought iPhone 6 units during the sales surge need a replacement phone? I wonder how that interacts with a 98% satisfaction rate... Hmm.
Unclear if they will be able to pull that off without their visionary leader.
Checking... Yep, Ives is still alive and working at Apple. Jobs was a great editor, but there are lots of visionaries still very much alive and working at Apple.
For a tech stock I think AAPL isn't a terrible investment but I think AMZN has more upside potential
Right, because a P/E of 290 is not at all risky to buy into and a stock price of 700/share is not at all buying in at a peak...
No reason that P/E cannot reach 600 LOL! In no way is buying into that tulip hysteria at all a gamble!
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I'd love to see Warren Buffet take a bath on tech stocks. Fake folksy guy.
When all you have is a hammer, every problem starts to look like a thumb.
I have only hated Apple since 1984, when Steve Jobs stood on a stage and proclaimed the sealed-box Macintosh to be hacker-proof. He meant 'hacker' in the old classical sense.
Fuck Apple.
Buffet doesn't make bets like that. His strategy is buy and hold. So ephemeral events don't matter to him, is trends. The real news here is buffet is buying into the tech sector at all. Apple has a P/E ratio below the s/p 500 average. That factors of four below your typical growth stock in the tech sector . Amazon and Facebook have p/e of 80 to 100 or more. Thus Apple is no longer a growth stick it is now a very stable value stock whose price reflects its actual earnings. Icahn's strategey is the opposite of buffet where he looks for the quick pop in price by leveraging a companies cash reserves or salable assets. Apple did do a stock buy back but not a wasteful one. Icahn was not happy .
Apples foray into buying expensive things like Didi or Beats shares is weird. It's the reverse play many growth companies do. A overvalued growth company will often buy a cheap value company outside its area of expertise to give it delve revenue and to take advantage of its anomalous p:E . Apple is buying risky companies using its enormous unspent revenue. The idea I think is to raise the p/e which would have made Icahn happy I guess. Too late.
Some drink at the fountain of knowledge. Others just gargle.
Yogi said " nobody goes to that bar any more, it's too crowded".
You call a company with decades of sustained Earnings growth a failure simply because it's rate of growth is slowing.
Some drink at the fountain of knowledge. Others just gargle.
I think it's almost certain to double within ten years - simply based on iPhone replacement sales, and services revenue growth alone.
Possible but like I said I have my doubts. Apple is a good company and I think it's stock is fairly valued. I just have my doubts about their ability to continue to grow the company without a new hit product and without avoiding any missteps along the way. It think it's a good investment but I think there are better ones out there.
Or, the fact that CurrentC just folded, leaving all sorts of high end stores (like Target) to start accepting ApplePay... Another factor is that Apple is continuously buying back its own shares.
It's unclear how much impact ApplePay will have long term. I like the product but we just don't know yet. (BTW calling Target a "high end store" is pretty funny - I think you meant big retailers)
Share buybacks are ok but personally I prefer a dividend in most cases, even in light of the tax consequences. Reason being that neither I nor the company have any way to know right now if the price the company is buying the stock for is a good price. Think of it as something of a bird-in-hand argument. If the best thing the company can think of to do with cash is to bet on its own stock in the casino that is the stock market, I'd rather they just give the money to me and let me invest it where I think prudent. I'm well aware there is evidence that stock buybacks can often provide better returns than dividends but I don't think that given Apple's current market cap that they are getting any sort of amazing return by buying back AAPL. I think AAPL is priced fairly but not cheaply.
Nope. Even if new people stopped buying iPhones today (unlikely in the extreme) replacement and services growth would easily increase revenue (if slowly).
IPhone sales volume actually fell last quarter for the first time. That is a possible indicator of a maturing and/or saturated market. If Apple wants to grow substantially they will need a new hit product within a few years. Just replacing existing phones will not justify a doubling of the market cap of Apple. If you want to see what would happen if iPhone sales slowed you can look at what is happening to their iPad business. People are still buying them but at a substantially slower pace and profits have fallen on that part of the business. It's still profitable but that's not where their growth is coming from.
The stock price has already cratered. Why do you think Berkshire has bought in now?
No the stock price has not cratered unless you are using a very different definition of crating from me. A real cratering would look VERY different. If Apple really cratered we'd be hearing about little else on the financial news. I would say the recent drawback is a correction or maybe even an over-reaction but definitely not a cratering.
Checking... Yep, Ives is still alive and working at Apple. Jobs was a great editor, but there are lots of visionaries still very much alive and working at Apple.
Tell me then. How many major products have these "visionaries" at Apple created since Jobs died? The Apple Watch is pretty much it so far and that has been anything but a runaway success. They've had a few projects with potential down the road (ApplePay, HealthKit, HomeKit, etc) but those haven't paid off yet. While the jury is still out we haven't seen the evidence that Apple can create another major hit product without Jobs at the helm. I wish them well and hope they can do it but they haven't proved it yet.
Right, because a P/E of 290 is not at all risky to buy into and a stock price of 700/share is not at all buying in at a peak...
P/E ratios are not the end-all of investment analysis. In fact the best time to buy an otherwise solid company is when the P/E is out of whack, either very large (meaning
" $232.9 billion in cash."
Apple, you've won the making money game. Give each of your 115,000 employee a million dollars. They can retire, go on a bender, whatever. The handful that stick around can keep making the products they enjoy making, perhaps spinning off their own start-ups that follow their unique passion.
(I realize this is not how capitalism or businesses work, but the way they do work in the real world seems kind of strange to me)
“Common sense is not so common.” — Voltaire
Contrary to headline though accurately stated in summary, Buffett wasn't behind decision to buy Apple; it was others at Berkshire.
He's done nothing.
Apple morale is at an all time low, even lower than Gil Amelio.
I go into the Apple store and wish there was something I should buy, but then I walk out, there's nothing.
Judging from their earnings, I'm not alone.
I hope share prices keep dropping. I want to see that dumb shit lose his fortune and off himself so we don't have to hear about him anymore. Luckily, he is old and should drop any moment.
Which Royal Dutch Shell are you talking about? I'm looking at quote.yahoo.com, RDS-B, and it says the yield is 3.76.
RDS.A and RDS.B are the same company. The difference is one stock is denominated in Euros and the other in Pounds Sterling. Otherwise they are the same. Current dividend yield is close to identical for either. Currently hovering at around 7.4% and has been bouncing between 7-8% for a while now.
Furthermore, the stock has gone between $36-$64 in 52 weeks (rounded), as opposed to Apple $90-$133.. So RDS had a much bigger percentage swing in a year..
That's a function of the swings in the price of oil recently. There currently is a surplus of oil on the market so unit price of oil is down and thus so are energy stocks. The price of oil will head back up eventually and so will the stocks along with it. Frankly now is a pretty good time to buy oil stocks like RDS and XOM. Those companies aren't going out of business, the stock price is low but the company fundamentals are solid and unchanged, the companies are still hugely profitable and the dividend yields are outstanding.
Apple is "fairly valued", it's only in terms about what people know about Apple today - it does not take into account the imminent growth on many fronts along with new products to launch in upcoming years.
ALL stock prices include expectations about future prospects of the company. It absolutely does take into account expectations regarding growth and new products. If you believe in some form of the efficient market hypothesis (and you should) then you would understand this.
The stock price is much lower than it would be if people looked at the stock rationally.
Because the market doesn't agree with your assessment it isn't rational? While it's conceivable you are right it's mighty presumptuous of you to presume that most other investors in Apple is being irrationally pessimistic. Markets are pretty smart and the number of people who can outperform them is pretty small. Unless you have a track record like Warren Buffet you might consider taking a more humble approach. Just because you think it should be worth more doesn't mean you are right.
How many BEFORE Jobs died? Just one. Amazing and highly performant products take time.
Come again? Hit NEW products released under Jobs after he returned to the company include: iMac, iPod, iPhone, iPad, iTunes. Since Jobs died: none. Now I'm willing to give them some time. Apple historically has introduces 1-2 big hit products per decade. But their last big one was the iPad which was introduced 6 years ago. Aside from a few minor products (Apple Watch, etc) Apple hasn't released anything since major Jobs died aside from some solid but incremental improvements to existing products. Now obviously they've got some stuff in development but that guarantees nothing. Apple has had major flops before and it's certainly possible they'll have another one at some point.
But there's a lot of argument to be made that Amazon has reached a point of saturation also and will not have nearly so rapid growth going forward.
Possible but you aren't presenting any actual evidence to back you up. Amazon's growth rate hasn't slowed at all as of the end of 2015. To argue that Amazon's growth prospects are diminishing you need to actually back that up with something other than wishful thinking.
The only reason the Amazon stock is so high right now is because of services but Apple has a MORE compelling services growth picture than even Amazon.
Not seeing the evidence to back you up here either and I'm watching both companies rather closely. Apple isn't really in web services much - not like Amazon is. Apple could be but so far they haven't gone after that market. Both are in media and both are doing rather well.
And that's just services, never mind many other physical products Apple makes that are doing very well, unlike the Fire...
I think you misunderstand the purpose of the Kindle devices including the Fire line. Amazon makes their money from selling ebooks and other content. They basically give the devices away at cost. Like Google they don't make their money by selling devices. It's almost the exact opposite model from Apple which uses content to drive device sales. Neither is a bad model but you can't evaluate them as if they are the same thing. Both are tech companies whose core competency is software but their business models couldn't be more different.
Is he for or against Apple's devotion to customer privacy and solid encryption?
"Is Warren Buffett calling a bottom in Apple's stock price?"
or is he helping other interests gain a back-door into encryption?
or is he protecting from other interests gaining a back-door into encryption?