The new iPhone 15 is about to hit the stores, and Apple CEO Tim Cook might have already sent one to his most important investor — Warren Buffett. The iPhone is what propelled Buffett, a longtime tech skeptic, to eventually invest almost half of Berkshire Hathaway’s equity portfolio in the tech company, becoming the largest shareholder outside of index and exchange-traded fund providers. He bought Apple shares after realizing how devoted people are to its phones, and its unique ability to keep consumers spending within the Apple ecosystem. The “Oracle of Omaha” began buying Apple’s stock in 2016 under the influence of his investment lieutenants Ted Weschler and Todd Combs, and seven years later, Berkshire’s 5.9% stake in Apple has ballooned to nearly $160 billion thanks to Apple’s stellar rally and aggressive buybacks. His return has been well over $100 billion on paper, making Apple Buffett’s best investment over the past decade. For those who think investing in high-flying tech defies Buffett’s value principles, the student of Ben Graham would tell you Apple is a consumer products company and it’s a better business than any of Berkshire’s wholly-owned subsidiaries. “Our railroad is a very good business, but it’s not remotely as good as Apple’s business,” Buffett said at the Berkshire shareholder meeting in May . The iPhone is “an extraordinary product. We don’t have anything like that that we own 100% of.” The investment icon conjured up a scenario to illustrate how powerful the iPhone is: A consumer pays $1,500 for an iPhone and $35,000 for a second car, and if they had to give up one thing, it would be the second car. ‘Most valuable real estate’ Buffett said the iPhone screen is ” most valuable real estate in the world, ” and that New York’s Fifth Avenue will never come close. The billionaire investor has called Apple Berkshire’s “third-largest business,” after its insurance and railroad holdings. Buffett, then 89, finally upgraded to an iPhone 11 in 2020, abandoning his $20 flip phone after receiving several models over the years from CEO Cook. As Wall Street analysts conduct channel checks , Buffett too likes to kick the tires and recognizes the importance of getting a first hand feel for products. The 93-year-old once recalled the moment when he realized how special the iPhone was. “When I take my great grandchildren to Dairy Queen, they bring along a friend sometimes and they’ve all got an iPhone and an iPad,” Buffett said in a CNBC interview in 2017. “They barely could talk to me… Then I asked them how they live their lives and the stickiness really is something that they do build their lives around it.” Buffett was impressed that Apple customers overwhelmingly upgrade their phones and laptops every few years. “The continuity of the product is huge and the degree to which [customers’] lives center around it is huge,” Buffett said. A fan of buybacks Buffett applauds Cook’s stock repurchase strategy, and how it gives Berkshire increased ownership of each dollar of Apple’s earnings without having to do anything. “Consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job,” Buffett said in his 2021 annual letter to shareholders. Apple authorized the repurchase of as much as $90 billion of common stock in both 2022 and again in 2023 . Apple’s buybacks substantially shrank the number of shares it has outstanding, thus boosting Berkshire’s stake. The conglomerate has also enjoyed regular dividends from Apple over the years, averaging about $775 million annually.
Buffett calls iPhone a singular product justifying outsized Apple bet
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