Warren Buffet Bets Big On Apple And Airlines

thefinanceguy (63)in #money • 7 years ago (edited)

Recent regulatory filings show that Buffet's Berkshire Hathaway has almost quadrupled it's original stake in shares of Apple. Buffet bought shares in Apple for the first time ever last year, with 15.2 million shares being acquired back then. Berkshire currently owns 57.4 million shares in Apple stock.

The initial purchase last year surprised a lot of people due to Buffet's tendency to shy away from technology companies. The most likely explanation is simply that Buffet is focused more on the economic moat and long term prospects of company, not an innate understanding of the consumer tech sector that he knows better than any one else.

I've mentioned before that Buffet is still moving more towards the qualitative side of things when picking a company even at his age. In the first phase of Buffet's investing career as a portfolio manager, he was a straight up stock picker who bought larger numbers of very cheap companies and sold them as soon as they reached intrinsic value. He had his highest returns during this period from 1955 through the late sixties, but Warren was becoming influenced by his then new partner, Charlie Munger, as well as Phillip Fisher through his book "Common Stocks and Uncommon Profits." This shift in Warren's value investing style never really stopped from that point.

Another surprise last year came when Berkshire started investing in airline stocks also for the first time in it's history. The reason for the surprise is mainly do to Buffet's long held views about the airline industry being a horrible place for investors. The quote below is an example.

I don't know exactly what to make of this other than Warren is actually focusing more on the quantitative side with these picks. Berkshire has now bought $9.3 billion in shares of the following companies: Southwestern Airlines, American Airlines, Delta Airlines and United Continental. The P/E of each of thse four companies is 16.19, 9.82, 8.87, and 10.98, which means they are all undervalued according to the price to earnings ratio. I don't know why he sees such a bullish future for airlines but time will tell if Buffet's bets are right.