Warren Buffett Is A Die-Hard Apple Bull
We have probably all heard the expression “skin in the game”. This is a perfect way to describe the relationship between Warren Buffett’s Berkshire Hathaway and Apple.
The conglomerate is reported to have a whopping 43% of its portfolio allocated to the Cupertino company’s equity. The large exposure to Apple seems consistent with Warren Buffett’s claim that:
“Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
Call it luck or investment talent by the Oracle of Omaha and his team, being such an Apple bull has paid off in the past several months. The stock has outperformed its industry and the broad market across whatever time frame one chooses to look at: the past week, the past month, year-to-date, the past year or half decade. See table and chart below.
Apple’s Institutional Ownership
As of March 2020, Berkshire Hathaway was one of Apple’s largest investors, ranking number 3 in size and trailing only ETF powerhouses Vanguard and BlackRock.
Keep in mind that Buffett’s firm did not start accumulating Apple until 2016, when it “dipped its toe in the water” with a mere $1 billion investment. Talk about going from zero to 100 (or to $90 billion, in this case) fast! See pie chart below.
Interestingly, however, Apple’s equity is not very heavily concentrated in the hands of institutional investors. The graph below shows that the company ranks low in institutional ownership among its FAAMG and other consumer tech peers. Alphabet leads the pack, followed closely by Facebook.
Other than Berkshire Hathaway, the top 3 investors probably need to be exposed to Apple by default. In other words, the managers of passive broad market Vanguard, iShares and SPDR ETFs have no choice but to put large quantities of money in the largest component of the S&P 500, Dow 30 and Nasdaq 100 – i.e. Apple in all cases.
Therefore, Berkshire Hathaway’s large position in Apple is unique and attention-grabbing. Few mega-cap companies can count on such a large stake placed by a mega active investor – Bank of America, American Express and Coca-Cola being some of the only exceptions.
Back to Warren Buffett…
It seems clear that Warren Buffett is a huge Apple bull, and he and his team are willing to place an outsized bet on the company. Now let me turn the floor over to the readers: do you think the optimism is justified? How comfortable would you feel allocating a large portion of your portfolio to Apple or any other high-conviction stock, ditching diversification as a “protection against ignorance”? Use the comment section below and let me know your thoughts.
Explore more data and graphs
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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)