Nearly half of Warren Buffett's $374 billion portfolio is invested in just one stock

93dd49b75409caabd6a951e8eb06bcc4

In addition to having our own fully operational companies, Berkshire Hathaway has a huge public equity portfolio of $374 billion. In total, there are almost four dozen stocks in which the conglomerate has a stake.

However, you will soon notice that Apple (NASDAQ: AAPL) makes up 41% of the entire portfolio. That position was driven by impressive stock market gains. Warren Buffett first bought this”Beautiful sevenshares in the first quarter of 2016. Since the beginning of that year to today, Apple is up a whopping 542%.

The average investor can learn a lot by figuring out the factors that prompted the Oracle of Omaha to bet on Apple nearly a decade ago.

Apple was a one-time investment opportunity

Around the time Buffett first picked up Apple stock, investors were concerned about weaker demand for the latest iPhone. Surprisingly, the company posted an 8% decline in revenue in fiscal 2016, after increasing revenue by 28% last year.

The market was unhappy as investors focused too much on short-term results rather than the company's long-term trajectory. I'm sure the thinking was that since Apple was generating over $200 billion in annual revenue, there wasn't much more potential for growth.

Consequently, Berkshire was able to purchase shares at a price of price-earnings ratio (P/E) ratio of around 11. In retrospect, that valuation seems like an absolute feat.

That's because this was still one of the best companies in the world in 2016. Apple benefited from a strong brand presence not only in the US, but also on a global level. Berkshire's top holdings consist of companies with powerful brand recognition, such as Coca-Cola And American Express. Perhaps no company has a more valuable brand than Apple.

Buffett also certainly appreciated the company's proven pricing power. Apple sells the most popular hardware devices in the world, a claim that has been true for a long time. Consumers have shown a willingness to pay higher and higher prices for these gadgets they can't live without.

Unlike many of the speculative, growth-oriented companies that investors seem to be infatuated with these days, Apple was in a fantastic financial position when Buffett first bought the stock. In fiscal 2016, Apple reported an operating margin of 28% and net income of $46 billion. Apple also returned a lot of capital to shareholders with dividends and buybacks.

Apple's future returns won't look like the past

Now that investors have an idea of ​​what Buffett first saw in Apple, a bet that turned out to be incredibly lucrative, let's take a look at the current situation. It's hard to believe, but this is an even more dominant company today, with much higher revenue and profit potential.

But investors shouldn't expect future returns to come close to historical gains. That's because Apple shares today trade at a price-to-earnings ratio of 26.3 – about 150% more than what Buffett was paying in early 2016. The market fully recognizes and appreciates that Apple is one of the elite companies in the world.

It would be fine to pay that above-market valuation if the company was staring at a big growth opportunity. However, that is not the case. As much success as the iPhone has had, it is now in a mature stage of its product life cycle. As a result, consumers no longer feel the need to upgrade to the latest model as often as before.

Wall Street analysts believe Apple will be able to grow revenue and earnings per share at a compound annual rate of 4% and 8%, respectively, over the next three fiscal years. That prediction doesn't come close to justifying the current valuation. As a result, it is best to avoid Apple stock unless there is a significant pullback.

Should You Invest $1,000 in Apple Right Now?

Before you buy shares in Apple, consider this:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Apple wasn't one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $537,557!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns April 22, 2024

American Express is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has one disclosure policy.

Nearly half of Warren Buffett's $374 billion portfolio is invested in just one stock was originally published by The Motley Fool

Related Posts

  • Finance
  • May 15, 2024
  • 12 views
  • 3 minutes Read
Here are the top ten picks for the Mormon church's $55 billion stock portfolio

Getty Images The investment arm of the Mormon church disclosed some of its assets in a 13F filing on Wednesday. The church has built a portfolio of individual stocks worth…

  • Finance
  • May 15, 2024
  • 14 views
  • 4 minutes Read
Florida lawmakers are proposing to change the tax code to provide premium relief for homeowners

Florida lawmakers are proposing to change the tax code to provide premium relief for homeowners Florida Congressman Byron Donalds is working with his colleague Senator Rick Scott on a bill…

Leave a Reply

Your email address will not be published. Required fields are marked *

You Missed

New contender tops Trump's VP shortlist: report

  • May 25, 2024
New contender tops Trump's VP shortlist: report

Cobra changes the game with the first commercially available 3D printed irons

  • May 25, 2024
Cobra changes the game with the first commercially available 3D printed irons

Donald Trump invited accused rappers to stop the Bronx campaign

  • May 25, 2024
Donald Trump invited accused rappers to stop the Bronx campaign

Hillary Clinton offers new excuse for why women abandoned her during the 2016 election | The Gateway expert

  • May 25, 2024
Hillary Clinton offers new excuse for why women abandoned her during the 2016 election |  The Gateway expert

Erik ten Hag 'very proud of players and staff' after FA Cup win while Man United's future remains uncertain

  • May 25, 2024
Erik ten Hag 'very proud of players and staff' after FA Cup win while Man United's future remains uncertain

Prince Harry throws 'Hissy Fit' during British trip

  • May 25, 2024
Prince Harry throws 'Hissy Fit' during British trip

Supreme Court Justice Sonia Sotomayor says she cries after some of the decisions

  • May 25, 2024
Supreme Court Justice Sonia Sotomayor says she cries after some of the decisions

European banks in Russia face 'an enormous amount of risk', says Yellen

  • May 25, 2024
European banks in Russia face 'an enormous amount of risk', says Yellen

Can blockchain improve weather forecasts? WeatherXM thinks so

  • May 25, 2024
Can blockchain improve weather forecasts?  WeatherXM thinks so

Russia's last missile cruiser in the Black Sea destroyed by Ukraine

  • May 25, 2024
Russia's last missile cruiser in the Black Sea destroyed by Ukraine

Supreme Court Justice Sonia “Wise Latina” Sotomayor Reveals She's “Crying” Over the Court's Conservative Rulings (VIDEO) | The Gateway expert

  • May 25, 2024
Supreme Court Justice Sonia “Wise Latina” Sotomayor Reveals She's “Crying” Over the Court's Conservative Rulings (VIDEO) |  The Gateway expert