Warren Buffett's Bet on Apple: A Closer Look

The Oracle of Omaha, Warren Buffett, is a big fan of Apple. This is not a secret. Buffett's global holding company, Berkshire Hathaway, has a significant stake in Apple worth more than $156 billion. This stake comprises about 47% of Berkshire's financial portfolio and more than a fifth of the company's $700 billion market value.

Berkshire Hathaway recently bought 20 million more Apple shares, which increased its stake in the company by 2%. This move has made many people curious because it needs to be clarified why it was made. After all, Buffett is known for being a good value investor, and many people think that Apple is not cheap.

Apple has become a go-to brand for most Americans. This is the only company that can compete with its wide range of goods, which include the MacBook, AirPods, and the iPhone. Buffett and his long-time business partner Charlie Munger have also praised the company's financial performance and how well it runs, which makes it a good investment choice.

But many investors want to know why Buffett would put more money into Apple when its price-to-earnings ratio (P/E) has gone from 12 in 2016 to around 30 now. The fact that the company is making more money could be the answer. Even though the rise in profitability is only about three percentage points, when you have almost $400 billion in sales, that's $12 billion more in profits, which is a big jump.

Some investors say the profit rise doesn't justify a P/E ratio of 30. After all, such a high number is usually only seen in companies snowballing, which Apple is not. The company's sales dropped by almost 3% in the second quarter of 2023, and Wall Street experts only expect sales to grow by 6.4% in 2024.

Because Apple doesn't increase, it might seem like an odd choice for Buffett. But one crucial thing that must be addressed is how stable the company is. Apple's shares are less likely to drop quickly because many own them directly and through index funds. Because it is durable, it is a good investment for people who want to keep their savings in a safe place or steady their portfolios, like Berkshire is doing.

Even though Apple isn't growing as fast as some other companies, its substantial business success and stable stock price make it an attractive choice for investors like Buffett. This doesn't mean that Apple is the best choice for all investors. Still, it does show how important it is to look beyond short-term growth rates and focus on long-term business performance and security when making investment decisions.

Before making any investment choices, you should always research your financial goals and how much risk you are willing to take.