Subscribe to our newsletter and stay informed

Check out our list of top companies

Check out our carefully compiled lists of the most relevant and impactful companies within their fields.

Check out our list of top unicorns

Read and learn about the biggest companies that various countries have produced, how they made it, and what the future looks like for them.

Buffett's Apple Bet: Moat Thesis Tested

Buffett has become one of Apple's most ardent advocates in recent years, showcasing his keen of consumer behavior
May 6, 2024

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, is known for his unconventional tech choices. Surprisingly, as late as 2020, he was still using a flip phone, despite his company's significant stake in Apple, the tech giant responsible for iPhones.

Buffett confessed, "I don’t understand the phone at all, but I do understand consumer behavior," during Berkshire's annual shareholder meeting in Omaha, Nebraska last year. Despite his technological reservations, he has become one of Apple's top advocates.

By the end of 2023, Berkshire Hathaway owned approximately 6% of Apple, a stake valued at $174 billion at the time. This amounted to about 40% of Berkshire's total value, making Apple its second-largest public stock holding, after Bank of America. 

As investors and Buffett enthusiasts gather for Berkshire's 2024 annual meeting, Apple is sure to be a major topic of discussion. Despite a recent 10% year-over-year decline in iPhone sales and a 4% drop in total revenue, Apple's stock experienced its best day since late 2022. This surge was fueled by a $110 billion stock buyback plan and increased margins resulting from a growing services business.

Buffett's bet on Apple and its CEO, Tim Cook, has proven incredibly profitable. In 2022, Buffett disclosed that Berkshire's initial investment in Apple was $31 billion. Since the beginning of 2016, the investment has seen an astonishing 620% increase in value.

Buffett, despite his self-professed lack of tech-savviness, has always had a clear, non-techie rationale for his admiration of Apple. He recognizes the fierce loyalty of Apple users to their devices and sees the iPhone as a product that keeps customers within the Apple ecosystem. He often refers to this as a "moat," a term he frequently uses to describe businesses he favors.

At last year's shareholder meeting, Buffett pointed out, "Apple has a position with consumers that they’re paying $1,500 or whatever it may be for a phone, and these same people pay $35,000 for a second car. And if they had to give up their second car or give up their iPhone, they’d give up their second car!" 

This assertion is supported by data. According to a study by Consumer Intelligence Research Partners, Apple benefits from 94% customer loyalty. This means that nine out of ten current U.S. iPhone owners choose another iPhone when buying a new device.

Buffett also lauds Apple's capital allocation strategy, which includes returning billions of dollars to shareholders annually through share buybacks and dividends. Interestingly, Apple CEO Tim Cook sought advice from Buffett when deciding on this strategy. Cook recounted in a 2016 interview with The Washington Post how he turned to Buffett for unbiased advice on returning cash to shareholders.

More about:  | |

Last related articles

chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram