Apple shares rally behind Buffett’s buy
Berkshire Hathaway shopping spree nearly quadruples its stake
CUPERTINO — The firm headed by mega-investor Warren Buffett nearly quadrupled its stake in Apple during the final three months of 2016, a shopping spree that helped propel the tech giant’s shares to alltime highs Wednesday.
Buffett-led Berkshire Hathaway increased its holdings in Apple to roughly 57.4 million shares by the end of 2016, a filing with the Securities and Exchange Commission showed. Berkshire Hathaway now is one of the 10 largest investors in Apple and holds about 1.2 percent of the tech firm’s outstanding shares.
“The Oracle of Omaha has blessed Apple of Cupertino,” said Michael Tchong, founder of Las Vegas-based Ubercool Innovation.
While numerous analysts are bullish about Apple at present, one industry watcher, Oregon-based Rob Enderle, believes Buffett’s decision to not only double down but quadruple down on Apple could be perilous.
“There is a lot of risk here for Buffett,” Enderle said. “When Buffett buys a stock, that emboldens all the other investors to buy. But traditionally, this wouldn’t be a good time to invest in Apple because the stock is at an all-time high. And Apple may be benefiting because Samsung crashed and burned with its Galaxy 7. Qualcomm may introduce its own phone.”
Berkshire Hathaway’s stake of 57 million-plus shares in Apple by late 2016 was 3.8 times larger than the approximately 15.2 million shares of the iPhone maker that Buffett’s firm held at the end of September, an ear-
lier SEC filing revealed.
At the end of 2016, Berkshire Hathaway’s ownership of Apple was worth $6.6 billion. Thanks to the rally in the tech giant’s shares so far in 2017, however, the holdings are now worth roughly $7.7 billion — a hefty gain of $1.1 billion in about six weeks of trading.
“It could be like a game of poker where you have a weak hand and your choices are to fold or to bluff,” Enderle said. “I think Buffett may be bluffing and will end up selling his Apple stock when it gets high enough.”
Cupertino-basedApple’s stock has soared 17 percent this year in its climb to alltime records.
Apple gained 0.4 percent and finished at $135.51 on Wednesday. That marked the third straight day this week of record-high closes for Apple’s stock.
The Apple purchases by Buffett’s firm contrast starkly with Berkshire Hathaway’s other holdings. Berkshire Hathaway has focused on owning legacyeconomy companies, such as Wells Fargo, Visa and other financial firms; consumer companies, such as Coca Cola and Walmart; air carriers, such as Southwest Airlines; and industrial firms, such as Deere.
Buffett has largely steered away from gobbling up tech shares.
Apple and IBM are among the striking exceptions.
Sales of the iPhone 7, along with the likelihood a future iPhone 8 will include significant upgrades over its predecessors, provided the initial impetus this week for Apple’s surge into the stratosphere. Disclosures of the Berkshire Hathaway purchases supplied fresh fuel.
Significant innovations in the iPhone 8 would likely prod current iPhone owners to leap to the 8th version of the Apple smartphone, experts said.
“Apple still has a very viable iPhone, and that phone is the lion’s share of the profits, and it’s a strong business,” Tchong said. “At least through iPhone 8, Apple will have a tremendous upgrade cycle.”
On Monday, Goldman Sachs raised its 12-month price target to $150 from $133 for Apple, accompanied with a “buy” rating. The same day, investment firm UBS stated that its 12-month target for Apple shares is $138 as part of a “buy” rating.
“Buffett has such an exalted status on Wall Street that these investments will drive the shares even higher,” Tchong said.