Is Warren Buffet’s Big Bet on Apple’s Stock A Crazy Idea?

Berkshire Hathaway

Warren Buffet the world’s most respected investor and CEO of Berkshire Hathaway has just made one of the biggest  best in his career of investment sagacity.

Today, Buffet was reported to have taken bullish position on Apple by buying Apple’s stock up to USD 1 billion. According to Wall Street Journal, Buffet’s position on Apple was revealed today through its  “13F filing with the Securities and Exchange Commission, a quarterly requirement for investors managing more than $100 million. The report indicates the number of shares held and the value of each stake at the end of the quarter, so it isn’t clear if Mr. Buffett’s firm has continued buying the stock since the quarter ended”.

Apple’s stock took a beating when the company reported a lower revenue in its Q1 2016 result due to its weaker iPhone sales. The company is due to commercially release its iPhone SE this May.

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Analysts are trying hard to rationalise Buffet’s decision as smartphone sales are getting to their diminishing returns. An interesting comment on Wall Street Journal said “I know Buffett does know much about technology, but I’m sure he can see that smartphone penetration is nearing 90%.  Hey Warren, buying Apple today is like buying MSFT, DELL & INTC (without the bubble premium) in 2000 when 90% of households had a PC.  There is not going to much growth in Apple, only financial engineering which has not work out so well for IBM since you bought it.

Another reader asked “Where was Buffett in 1995-1999 when Saudi Prince Alwaleed bin Tala was making his Apple investment (as was I) and caught the wave of appreciation (and several stock splits) for the next 10 years?

After the new reached the NASDAQ where Apple is listed, shares of Apple gained USD 1 billion. It will interesting to see what becomes of Buffet’s ‘crazy decision’ to bet big on Apple.