Berkshire Hathaway: How To Think About Apple The Way Buffett Does
Summary
- Berkshire Hathaway's huge position in Apple Inc. reflects many Buffett principles: brand power, low capital needs, and finding growth in already large companies with good track records.
- One principle is starting small while testing a premise, ramping up rapidly as premise is strengthened, and having prices in mind to stop buying or sell a bit.
- Making Apple one of Berkshire's "big four" treats it as a subsidiary, meaning an intent to ignore price and focus on operating results including "look through" earnings.
- Ignoring quarterly results, Buffett likely sees Apple as a combination of great management, solid growth, and optimal shareholder-friendly use of cash flow with large buybacks and small dividend.
- Buffett's earlier model for Apple might be Coca-Cola: strong brand and management and a position now 94.5% cap gains with dividend yield of 55% on cost.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of BRK.B, GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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