Just in case a few of you might own some Apple stock I thought you might like to read the reason Buffett is going deep into Apple, now the 3rd largest holder of Apple stock.
> > http://amigobulls.com/articles/warren-buffett-is-buying-more-and-more-apple-inc-aapl-stock-why > > <http://amigobulls.com/articles/warren-buffett-is-buying-more-and-more-apple-inc-aapl-stock-why> > > Warren Buffett Is Buying More And More Apple Inc. (AAPL) Stock. Why? > Warren Buffett's Berkshire Hathaway has rapidly grown its Apple investment. > So what draws the Oracle of Omaha to this tech giant, a sector he has avoided > for so many years? > > > <http://static.amigobulls.com/articles/wp-content/uploads/2017/03/small_width400_Warren-Buffett-Is-Buying-More-And-More-Apple-Inc.-AAPL-Stock-Why-cover-image.jpg?ref=il> > wallpaperrs.com > Warren Buffett, the sage of Omaha, as he is lovingly called, had for long > chosen to stay out of the world of multi-bagger tech stocks. However, the > recent entry into Apple (NASDAQ:AAPL) > <http://amigobulls.com/stocks/AAPL/analysis?ref=il> has surprised many. Why? > Well, because Apple and technology come across as synonyms for a lot of > people. And rightly so! The Cupertino, California-based tech behemoth has > disrupted multiple technology markets in the last few decades. Apple has a > history of disruptive products right from the Mac, iPod, iPhone and the iPad, > as each of these products jolted their respective broader markets into > action. However, Warren Buffett's investment in Apple has less to with Apple > as a technology giant, as he still claims he doesn't understand tech. So Why > is he buying Apple shares at a rapid pace? > > Warren Buffett views Apple as a consumer company. > > Yes, Warren Buffett has been buying shares of Apple rapidly. In fact, the > Buffett-led Berkshire Hathaway (NYSE:BRK.A) > <http://amigobulls.com/stocks/BRK.A?ref=il> has lapped up over 70M Apple > shares between December 31, and Apple's latest earnings report at the end of > January. That's more than twice the number of shares the company reported in > its 13F filing > <http://amigobulls.com/articles/can-warren-buffett-led-berkshire-hathaway-inc-stock-still-make-you-rich?ref=il> > for the period ending December 31. By Warren Buffett's own admission on > CNBC's 'Squawk Box > <http://www.cnbc.com/2017/02/27/billionaire-investor-warren-buffett-speaks-with-cnbcs-becky-quick-on-squawk-box.html?ref=il>' > Berkshire Hathaway now has 133M shares of Apple Inc., which equates to > $18.5B worth of Apple stock at the last closing price. In other words, > Berkshire Hathaway now holds nearly 2.5% of Apple's total market cap. And > well, Warren Buffett has himself bought 123M of those shares. Quoting the > Oracle from the 'Ask Warren' show, "One of them had had 10 million shares, > and then I bought another 123 million shares, or something like that." The > 'One of them' here refers to one of Warren's deputies, Ted Weschler or Todd > Combs. When asked why is he buying Apple shares? The Oracle of Omaha > remarked: 'Cause I Liked It.' Coming to the big question of 'Why does Warren > Buffett now like Apple, the tech giant, after having avoided technology > companies for so many years?' > > Well, the answer is Warren is not even looking at Apple, the tech giant. He > still maintains and says that he is not a technology investor. When asked to > explain the rationale of investing in Apple, this is what Buffett had to say, > "Well, I would say Apple's — I mean, obviously it's very, very, very > tech-involved, but it's a consumer product to a great extent too. And I mean, > it has consumer aspects to it......Apple strikes me as having quite a sticky > product and enormously useful product that people would use, and not that I > do.....And I don't know what goes on inside their research labs or anything > of the sort. I do know what goes on in their customers' minds because I spend > a lot of time talking to 'em." The Oracle of Omaha believes that the > Cupertino-based tech giant has a very sticky product which gives the company > a huge earning power. Well, it isn't surprising that Apple is able to move > millions and millions of products and prices which aren't anywhere close to > 'pocket-friendly.' > > > Apple's huge cash pile is a margin of safety > > The legendary value investor didn't really spend much time on the margin of > safety. But when you come to think of it, Apple does have a huge margin of > safety. With $246B in cash and cash equivalents or something to the tune of > $220B (after a 10% repatriation rate), AAPL stock is selling at an ex-cash PE > ratio of less than 12. A business generating nearly $52.5B in annual free > cash flows at an (ex-cash) valuation of $523B, or a P/CF ratio of under 10. > And, well, Apple is also a shareholder friendly company, which means a decent > dividend to go along with the investment. The current annualized dividend of > $2.28 could earn Berkshire annual dividend payments of a cool $300M in annual > dividends. > > Apple Is A Cash Generating Machine > > Apple has steadily increased its capital returns program over the last few > years, paying increasing dividends while also increasing its spend on share > repurchases. But, does that, in any way, dampen the company's future? Well, > if you look at the company's capital returns program over the last twelve > months, it has spent a total of $48B on its capital returns program, compared > to its LTM free cash flow of $52.5B. And well, that's after an R&D > (Research&Development) spend which has increased by an average of nearly 31% > YoY over the last 3 years, hitting $10.05B in FY 2016. And, that's one of the > biggest R&D <http://www.strategyand.pwc.com/innovation1000?ref=il> budgets > out there. > > With a background on the the amount of R&D and capex expenditures Apple is > undertaking, its safe to assume the company is doing everything it can to > remain a disruptive force in the world of tech. However, that's not really > the point here. The point to note is that in spite of these massive expenses, > the company keeps adding to its cash pile with each passing year. And, its > this ability to spit out these huge amounts of cash that puts Apple in a > league of its own. The company is generating a far greater amount of cash > than it can currently spend, and that's a wonderful business to be a part of. > The fact that the management has been actively increasing spends on Capital > returns without compromising on their future is laudable. If you ain't able > to find enough use cases for the cash you generate, you ought to return it to > the rightful owners. And, Apple is doing just that. > > Final thoughts > > Warren Buffett-led Berkshire Hathaway has scaled its position in Apple stock, > nearly doubling the number of shares from the last reporting period. Apple > could, in fact, be the third largest holding in the portfolio, based on the > legendary investor's latest comments. While it could be baffling to > understand what draws the Oracle of Omaha to a tech giant, investors need to > look at Apple from a slightly perspective. Apple has a really sticky product > (think products which can be around for a long long time), is a cash > generating machine and comes with a significant margin of safety. And > suddenly, Apple doesn't seem like a un-Warren Buffett like investment now. > > > Looking for great tech stocks? Check out our top stock picks > <http://amigobulls.com/stocks-to-buy/top-tech-stocks/?ref=il>, which have > beaten the NASDAQ by over 125%.
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