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• The conglomerate’s 5% stake is now worth $160 billion due to the massive rally that extended into the new year
• Berkshire’s Apple stake makes up more than 40% of its equity portfolio
Warren Buffett’s Berkshire Hathway made over $120 billion after Apple briefly hit more than $3 trillion market capitalization on Monday.
The conglomerate acquired a 5% stake worth $36 billion in the iPhone maker’s stock between 2016 and mid-2018. Berkshire Hathway’s investment in Apple is now worth $160 billion as the massive rally extended into the new year.
The conglomerate has enjoyed regular dividends Apple, averaging about $775 million annually.
Buffett usually stays away from tech stocks, a fact which is very well known but warmed up to the sector in the past decade. Today, Berkshire’s Apple stake makes up more than 40% of its equity portfolio.
In its 2020 annual report, the conglomerate said, “Berkshire’s investment in Apple vividly illustrates the power of repurchases. Berkshire now owns 5.4% of Apple. That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding.”
“We also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018,” said Berkshire in the report.
Investors expect Apple Inc’s market capitalization to “grow faster than the economy”. Patrick Armstrong, chief investment officer at Plurimi Group, said that the stock’s valuation was justified.
“Apple is an incredibly positive company in terms of cash flow generation, earnings, market share, profit margins. It’s almost ideal when you look at all of those metrics,” Armstrong told CNBC, arguing that the stock’s valuation is justified.
Inputs from Wall Street Journal
Picture Credits: MacMost