Warren Buffett, Chairman and CEO of Berkshire Hathaway Inc.
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Warren Buffett said he now sees tech giant Apple as one of the four pillars of Berkshire Hathaway, the conglomerate of mostly old-economy businesses he has built over the past five decades.
In his annual letter to shareholders published on Saturday, the 91-year-old investment legend listed Apple as ‘Our Big Four’ and even called the company the second largest after Berkshire’s insurance group, thanks to its general manager.
“Tim Cook, the brilliant CEO of Apple, rightly considers users of Apple products his first love, but all of his other constituencies also benefit from Tim’s managerial touch,” the letter reads.
‘The Oracle of Omaha’ has made it clear that he’s a fan of Cook’s stock buyback strategy and how it gives the conglomerate increased ownership of every dollar of the iPhone maker’s profits without that the investor does not have to lift a finger.
“Apple – our second giant measured by year-end market value – is a different type of stake. Here our stake is just 5.55%, down from 5.39% a year earlier,” said Buffett said in the letter. “This raise looks like small potatoes. But consider that every 0.1% of Apple’s revenue in 2021 was $100 million. We didn’t spend any Berkshire funds to earn our raise. Buybacks from Apple did the job.”
Berkshire began buying Apple shares in 2016 under the influence of Buffett’s investor MPs Todd Combs and Ted Weschler. By mid-2018, the conglomerate had acquired a 5% stake in the iPhone maker, a stake that cost $36 billion. Today, Apple’s investment is now worth more than $160 billion, representing 40% of Berkshire’s stock portfolio.
“It’s important to understand that only Apple dividends are accounted for in Berkshire GAAP earnings reports – and last year Apple paid us $785 million of that. Yet our ‘share’ of Apple earnings Apple’s $5.6 billion retained company was used to buy back Apple stock, an act we applaud,” Buffett said.
Berkshire is Apple’s largest shareholder, outside of index and exchange-listed fund providers. The conglomerate has enjoyed regular dividends from the tech giant over the years, averaging around $775 million a year.
Railway and energy
Buffett also credited his railroad business BNSF and energy segment BHE as two other conglomerate giants, both of which posted record profits in 2021.
“BNSF, our third giant, continues to be the number one artery of American commerce, making it an indispensable asset to America as well as to Berkshire,” Buffett said. “BHE has become a powerhouse and a leading force in wind, solar and transmission across much of the United States.”
Berkshire’s operating profit jumped 45% in the fourth quarter as its rail, utility and energy businesses continued to rebound from the pandemic.
In annual letter, Warren Buffett calls Apple one of the ‘big four’ driving conglomerate stock
Source link In annual letter, Warren Buffett calls Apple one of the ‘big four’ driving conglomerate stock