Should 40.3% of Buffett's $336 billion portfolio buy Apple?
Warren Buffett doesn't usually bet his farm on specific stocks. $Berkshire Hathaway-A(BRK.A.US$ Most of the approximately 40 stocks included in the portfolio are less than 1% of the total stock investment of the conglomerate.
However, $Apple(AAPL.US$ is a notable exception. Even after Buffett and his team cut positions, a whopping 40.3% of Buffett's 336 billion dollar portfolio was invested in iPhone manufacturers as of March 31.
Why Buffett loves Apple
To understand why Mr. Buffett loves Apple so much, it's a good idea to remember Mr. Buffett's letter to Berkshire Hathaway shareholders last year. This legendary investor said that he and the late Charlie Munger, a long-time business partner, chose a business rather than a stock.
Buffett highly appreciates Apple's business. At the 2023 Berkshire Annual Shareholders' Meeting, he said, “Apple happens to be a better company than any company we own.” This says a lot when you consider that Berkshire owns such great companies as BNSF, Geico, and See's Candies.
Apple CEO Tim Cook has received strong support from Mr. Buffett. “Tim Cook is one of the most elegant CEOs and he understands business,” he told CNBC last year. Buffett pointed out that Apple co-founder Steve Jobs “basically invented” the iPhone, but Cook “managed the company in an extraordinary way.”
Admittedly, Berkshire slightly reduced its position in Apple in the first quarter. Buffett said at the company's annual meeting on Saturday that it is “very likely” that Apple will still maintain its largest shareholding.
Should I buy Apple stock too?
In the second quarter of Apple's 2024 fiscal year, the company's sales fell 4% from the same period last year. Second, considering that slight growth, stock prices are overvalued. Apple's stock price is currently trading at 26 times or more of the expected PER (price-earnings ratio).
Also, it is thought that the company's Worldwide Developers Conference (WWDC) to be held in June will also be a good catalyst for stock prices. Apple is widely expected to announce multiple artificial intelligence (AI) products at WWDC, with particular emphasis on generative AI.
So far, most of the attention on generative AI has been on cloud-based applications. However, there is a huge opportunity for edge AI, or deployment of AI applications to devices. Apple, which has an installed base of over 2.2 billion devices, has the potential to dominate the edge AI market.
Buffett once said, “Diversification is protecting oneself from ignorance. There's not much point in knowing what you're doing.” I said that. But the reality is that most investors are ignorant. We don't know everything we need to know to bet farms on individual stocks, even when it's a great brand like Apple. That's why we should be careful.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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