‘Apple is not 35% of Berkshire’s portfolio’

apple stock (AAPL) currently representing close to 40% of the shares held by Berkshire Hathaway. But talking to Berkshire (BRK-A, BRK-BUILD) on Saturday, CEO Warren Buffett noted that saying that Apple includes this percentage in Berkshire’s overall portfolio is an inaccurate understanding of the business.

“Apple doesn’t make up 35 percent of Berkshire’s portfolio,” Buffett said. “Berkshire’s portfolio includes railroads and the energy business Garanimals, you could name it See’s Candies – they’re all businesses.”

Berkshire listed $997 billion in assets at the end of the first quarter, and just $328.16 billion of that was investments in equity securities. Still, Apple has become a big stock in Berkshire’s equity portfolio since the company began buying in 2016.

That was born from Berkshire’s additional purchases but also from growth in Apple’s services business and its commitment to buy back Apple’s stock. Apple shares have risen more than 500% since Berkshire first bought it while acquisitions have increased Berkshire’s stake in Apple. Today, Berkshire owns about 5.8% of the company.

“It just happened to be a better business than any we own,” said Buffet. “And we’ve invested a decent amount of money in it, but we don’t make more money than we have in our railroads…our railroads are [a] very good business, [but] not as good as Apple’s business.”

Buffett has long been a supporter of Apple CEO Tim Cook and the success of the company’s products, including the iPhone. On Saturday, Buffett quipped: “I don’t understand [iPhone] but I understand consumer behavior.”

Apple iPhones are displayed inside India's first Apple retail store during a media preview, a day before its launch in Mumbai, India, April 17, 2023. REUTERS/Francis Mascarenhas

Apple iPhones are seen inside India’s first Apple retail store during a media preview, a day before its launch in Mumbai, India, April 17, 2023. REUTERS/Francis Mascarenhas

Less than 24 hours later iPhone sales growth sent Apple shares up nearly 5% on Friday, Buffett once again touted the strategic advantage of the iPhone.

“Apple is in a position with consumers where they can pay $1,500, or whatever, for a phone,” Buffett said. “And the same people pay $35,000 for a second car, and [when] they have to give up their second car or give up their iPhone, they give up their second car. I mean, it’s an extraordinary product. We don’t have anything like that that we own 100%, but we’re very, very, happy to have 5.6%, or whatever we can, and we’re happy every 10 % increase. “

The discussion around Berkshire’s ownership of Apple stems from investor questions about portfolio diversification. And while Berkshire owns a lot of stock, its top holdings have quickly become the biggest in the company. five companies include about 75% of Berkshire’s holdings.

Charlie Munger, Buffett’s right-hand man, doesn’t think the lack of diversification is a problem.

“One of the silly things [that gets] “It’s a crazy idea,” Munger said. It is not easy to have countless good opportunities easily recognized. And if you only have three ideas, I want that to be my best idea instead of my worst. And now, some people can’t distinguish their best idea from their worst, and in the act of making an inherently good investment decision, they think it’s better than it really is. I think we make fewer such mistakes than others. And that’s a blessing for us.”

Josh is a reporter for Yahoo Finance.

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