Why Warren Buffett invests in Apple stocks?
World stock markets entered the second half of the year. And although, according to a number of experts, the US indices seem overpriced, Warren Buffett (through its investment company Berkshire Hathaway) continues to increase its position in some US companies. Among them are - Apple, Bank of New York Mellon Corp and US Bancorp, which are also three of the largest positions in the portfolio of the genius investor at the end of the first half.
In the last twelve months, Berkshire Hathaway has raised its investment in shares by 1%.
Buffett has bought more than 110 million new shares in Apple for the past one year. This makes the company the biggest market share in Buffett's portfolio (21.27%). It's hardly surprising, considering that Apple is the largest company by market capitalization in the world, valued at 930 billion USD, and the company with the highest weight in indices such as the Nasdaq 100 and the S&P 500.
Interesting is the fact that Warren Buffett did not own Apple shares in 2011, although even then the "Oracle of the Omaha" described the company as "phenomenal".
According to the estimates, Buffett realized an average yield of about 30% of its first stock purchase in March in 2016. In fact, if we keep track of Buffett's investment in Apple and the rise in this investment, it all seems very logical. For a long time, the company's shares meet the requirements of the genius investor to a company to channel funds to it.
Buffett says that one company must "be able to manage successfully, even by our idiot nephew". So it must be a leader in the industry and its products can not easily be replaced by competitors. There is a coincidence here. Apple's business, largely thanks to its iOS operating system and the built-in micro-environment, is unique in nature, and no one can replace the company's products and services (without sacrificing the software environment). In addition, the company's management has proven so far that it has managed to translate the company into difficult moments, as has not been the case in Apple's recent history after the brilliant Steve Jobs.
Buffett is looking for companies that provide investors with a long and sustained return on equity (ROE). The higher ratio it better. It should be noted that Apple's ROE ratio is 40.86%, to July 4, which is one of the highest among the largest US companies, and is nearly three times over the recommended by Buffett 15%.
Another bonus - Apple's return on assets is 11.76%, a level unusually high for the world's largest market capitalization company.
Buffett is looking for companies with a good margin of profit. A particularly positive signal is when this margin has stayed high in recent years. Apple's profit margin is at 21.55%. This is an extraordinary, although slightly decreasing in recent years, is kept at very high levels, which all other giant companies would envy.
Apple has an available 90 billion USD in cash, so its 121.8 billion USD indebtedness is not considered a particularly big problem. It is well-known that Buffett does not like stocks of highly indebted companies.
Posted from my blog with SteemPress : http://financeandmarkets.com/why-warren-buffett-invests-apple-stocks/