Don’t cry for Warren Buffett’s $18 billion Apple mistake

From Business Insider’s “Warren Buffett’s Apple stake has surged in value to $128 billion. It would be worth $146 billion if the investor hadn’t slashed it.” posted Thursday:

Warren Buffett’s Apple bet jumped in value to $128 billion on Wednesday, thanks to the iPhone maker’s stock price closing at a record high. The investor has more than tripled his money on Apple in the past three years- but he would have quadrupled it if he didn’t sell a chunk of the holding.

Buffett’s Berkshire Hathaway conglomerate spent $36 billion between 2016 and mid-2018 to amass the equivalent of 1 billion Apple shares, which would be worth $146 billion today. However, Buffett has cashed in about 12% of that stake in recent years.

The Berkshire chief may be kicking himself for taking money off the table. After all, he describedApple as “probably the best business” he knows in a CNBC interview last year, and touted Berkshire’s stake as its third-most valuable asset and a “family jewel” in his latest shareholder letter.

Moreover, Buffett acknowledged during Berkshire’s annual meeting in May that it was “probably a mistake” to trim the position. He also revealed that Berkshire’s vice-chairman and his business partner, Charlie Munger, had advised him against selling the stock.

My take: He’s still way ahead.

7 Comments

  1. Romeo A Esparrago Jr said:
    “ Don’t cry for me, Argentina. “
    Mr. Warren Buffett’s net worth $96+B greater than Top 5, maybe Top 10 Argentine’s Wealthiest, combined.

    But not greater than Argentina’s GDP $449B.

    He won’t lose sleep about the $18B. LOL

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    July 9, 2021
  2. Jerry Doyle said:
    “…. The investor has more than tripled his money on Apple in the past three years- but he would have quadrupled it if he didn’t sell a chunk of the holding.”

    I attempt to explain to my retail investor friends that with Apple, it all is about “patience.” The market always rises long term, and so does Apple. Apple remains a “growth” play. This is another factor I explain to my retail investor friends.

    Apple is firing on all cylinders. The future for the company and for its investors never looked brighter. It goes to show how FsOB understand and know Apple better than professional analysts know Apple; and even Warren Buffett. I still wonder if Warren Buffett & team understand Apple fully, or else they never would have sold 12% of their stake in Apple. Then again, perhaps Warren Buffett put that 12% stake to better use somewhere else. The article, though, says not! “…. Moreover, Buffett acknowledged during Berkshire’s annual meeting in May that it was ‘probably a mistake’ to trim the position. He also revealed that Berkshire’s vice-chairman and his business partner, Charlie Munger, had advised him against selling the stock.”

    “….Despite Berkshire’s pruning, Apple has remained its biggest holding by far, accounting for over 40% of its US stock portfolio in recent months.”

    Now “that” surprises me and gives me comfort for being all-in on Apple. That 40% stake imparts to me that Berkshire indeed has done its homework and understands Apple. I never would have ‘thunk’ Birkshire would load up almost half of its holding in a single company! Speaks volumes for Apple.

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    July 9, 2021
    • Manfred Schwencke said:
      „… perhaps Warren Buffett put that 12% stake to better use somewhere else.“

      That is interesting: Berkshire has lots of cash on the balance sheet. So they sold Apple without an alternative investment opportunity which I have never understood as a shareholder of Apple and Berkshire …

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      July 9, 2021
  3. Gregg Thurman said:
    “….Despite Berkshire’s pruning, Apple has remained its biggest holding by far, accounting for over 40% of its US stock portfolio in recent months.”

    There goes the argument in favor of balanced diversification.

    Pick your winners, then load up on them.

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    July 9, 2021
  4. Bart Yee said:
    Well, we’ve all done something like that, just with not so many zeros behind it.

    IIRC, Berkshire did purchase shares of other companies with some portion of these proceeds, and as noted laid up some of this cash, presumably for other uses. Didn’t BH also begin some buybacks?

    Yes!

    June 24 (Reuters) – “Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) appears to have extended its drive to repurchase its own stock, even with its share price near a record high, according to regulatory filings and an analyst.

    Edward Jones & Co analyst James Shanahan estimated that buybacks have totaled about $5.15 billion between April 22 and June 22, and about $6.46 billion in the second quarter, based on Berkshire’s average share price during the applicable periods… Buffett has aggressively repurchased Berkshire shares as high stock market valuations and the growth of special purpose acquisition companies, which take private companies public, made buying whole companies appear expensive.

    Berkshire repurchased $6.6 billion of stock in the first quarter, and a record $24.7 billion in 2020.

    Its last major acquisition was a $32.1 billion takeover of aircraft parts maker Precision Castparts in 2016. Berkshire ended March with $145.4 billion of cash and equivalents.“

    So yeah, BH still has a lot of cash but has used some of that AAPL sales cash elsewhere.

    https://www.reuters.com/business/berkshire-hathaway-appears-buy-back-more-stock-2021-06-24/

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    July 9, 2021
  5. Fred Stein said:
    Not only does Warren’s cap gain crush the averages, but the yield protects against inflation and interest rate risk. It’s 1.83% on a cost basis, and rising each year.

    That’s reason enough to hold 40%.

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    July 9, 2021
  6. Hap Allen said:
    Buffett in 1999:

    “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

    Little did he know at the time…

    https://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm (Safari Reader View recommended.)

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    July 9, 2021

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