Buffett Just Added Another $1.1 Billion Gain in Apple

When you say the name Warren Buffett, investors listen.

So, when I heard that the third-richest person in America, who is worth $65.5 billion according to Forbes, just made another $1.1 billion in six weeks, my ears perked up, too. 

My interest was really piqued when I found out that Buffett, via his company Berkshire Hathaway (BRK-B), made that $1.1B in one stock … Apple (AAPL).

Subscribers to my Cash Flow Kings newsletter have something in common with Mr. Buffett. They, too, own AAPL. (Our gain in the last six weeks isn’t quite as big as the “Oracle of Omaha’s.” But it’s still pretty nice, as we’re up more than 100% on the position overall.)

News of Buffett’s big win in Apple came after Berkshire Hathaway’s 13F filing for Q4, which the SEC requires each quarter for institutional investment managers.

The filing showed that Berkshire had nearly quadrupled its stake in Apple. As of year-end, the company owned 57 million AAPL shares.

What’s really interesting is that this bushel of Apple shares was only 15 million at the end of the third quarter. According to Forbes, Mr. Buffett’s stake in AAPL was worth approximately $6.6 billion as of Dec. 31.

And, if Buffett hasn’t touched his position since the end of last year, it’s now worth a whopping $7.7 billion.

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The graphic below, as it appeared in a MarketWatch article, does a great job of showing when, and at what price range, Berkshire boosted its stake in AAPL last year.

Source: MarketWatch/FactSet

The graphic also shows the 17% gain in AAPL shares year-to-date on its march to record highs.

As I mentioned, we’ve owned AAPL shares in our Cash Flow Kings newsletter for some time (since August 2013).

We have more than doubled our money in that position since, but we didn’t buy AAPL because of Warren Buffett.

Nor did we buy Apple because of a recommendation from a Wall Street analyst.

We bought, and held, Apple because of its tremendous fundamental metrics … chief of which is the company’s ability to generate huge cash flow.

Yet with Apple, there are always the doubting Thomases who say that the company doesn’t have any “new” ideas, especially since the death of founder and CEO Steve Jobs.

Last quarter, the company reported earnings that bested estimates AND revenue that met expectations. Yet, there are still plenty of naysayers.

One thing I found interesting in the Apple earnings report was the iPhone sales numbers. During the three months ended in December, the company sold some 45.5 million iPhones. Wall Street was only expecting sales of 44.8 million iPhones.

Later this year, there are reports of an iPhone 8 model that will supposedly include a major redesign of the iconic smartphone.

The new iPhone is likely to keep the revenue coming in strong. But Apple isn’t stopping there.

The latest news on the Cupertino tech giant is the company’s exploration into producing original programming content.

According to MarketWatch:

At Recode’s Code Media conference Tuesday, Apple … revealed the debut trailer for an upcoming unscripted reality show called “Planet of the Apps.”

Not to let the name fool you, the show is more like “Shark Tank,” but geared toward developers trying to get their apps off the ground.

No doubt, the success of original content TV programming from companies such as Netflix (NFLX) and Amazon.com (AMZN) have gotten executives at Apple interested, and why not?

The company has plenty of cash on its balance sheet to fund exploratory ventures. And considering the ubiquity of the delivery mechanism, i.e. Apple TV and iTunes, it just makes sense to experiment with original content programming.

According to Apple CEO Tim Cook:

“We’re learning a lot about the original content business and thinking about ways that we could play at that. We have more things planned for [Apple TV], but it’s come a long way in a year, and it gives us a clear platform to build off of.”

One thing I think we can say with confidence is that Apple is going to continue building big profits … and that means investors are likely to continue to feel how Mr. Buffett feels (although maybe on a bit smaller scale).

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What else is Buffett, and Berkshire, buying?

He’s added to his four airline positions: American (AAL), Delta (DAL), United (UAL) and Southwest (LUV). This news sent all four stocks anywhere from 2% to 3.6% higher today …

He’s also slashed his positions in Wal-Mart (WMT) and Verizon (VZ), which closed flat and down today, respectively.

Again, we’re not making any moves just because Buffett, or any legendary investor, does. But it certainly pays to pay attention to how other investors trade this kind of news … and to get in front of them before they do.

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If you would like to comment on this issue, or any of the issues we cover in the Afternoon Edition, all you have to do is leave me a comment on our website or send me an e-mail.

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The three broader-markets closed higher for the fifth day in a row. The last time we saw action like this was January 1992, when the major indexes notched six days of consecutive records. Today actually marked the seventh day of gains for the Nasdaq, which last saw a similar stretch of gains in December 1999. The S&P 500 and Dow Industrials gained 0.5% in Wednesday’s session, with the Nasdaq gaining 0.6%.

• That’s one heck of a run: The bull market for the S&P 500 will reach eight years in length as of Thursday, March 9, 2017. Through last Friday (Feb. 10), the S&P 500 has gained +305% (total return) during its bull run.

• The Valentine’s Day Index: Valentine’s Day is, somewhat surprisingly, the fourth-biggest shopping day of the year. LPL Research has spent the last several years tracking the cost of four typical Valentine’s Day gift categories (A Night In, A Night Out, A Getaway and Jewelry) over time by gleaning data from the Consumer Price Index. For 2016, the Index reveals that inflation was lower than average for Valentine’s Day gifts. The cost of a night at home fell for only the third time in the history of the Index, while all other categories went up. Jewelry was the biggest mover, seeing a 5.8% increase in price after decreasing for the past four years.

• What’s the real unemployment rate?: The 4.8% unemployment rate for January 2017 reported by the government was based upon a survey of 60,000 households (“sampling”). The employment status of the individuals in those 60,000 households is then extrapolated to project national figures for our country’s actual 118.6 million households (Department of Labor).

• The four largest: 1 out of every 3 Americans (33%) lives in just 4 U.S. states — California, Texas, Florida and New York. These four states were home to 107.5 million citizens at the end of 2016 out of our nation’s population of 323.1 million. (Census Bureau)

• Pile it on: The national debt increased +37% during Bill Clinton’s 8 years as U.S. president, reaching $5.7 trillion as of 1/20/01. The national debt increased +86% during George W. Bush’s 8 years as U.S. president, reaching $10.6 trillion as of 1/20/09. The national debt increased +88% during Barack Obama’s 8 years as U.S. president, reaching $19.9 trillion as of 1/20/17 (Treasury Department).

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “Buffett Just Added Another $1.1 Billion Gain in Apple”

  1. When you say that the S&P 500 index has gone up 305% since March 2009, you are actually saying that the PRICE in DOLLARS has gone up that much. The actual VALUE of the stocks in that index has not gone up that much. Everyone seems excited over the DOW index breaking above $20,000. They all claim it’s an “all time high” in stock value. It is not anything of the kind! Again, this is just the price expressed in dollars. Consider, the price of the DOW index was $1,000 thirty years ago and now it is $20,000. Has the value of stocks increased twenty fold in the last thirty years? NO IT HAS NOT! All that DOW 20,000 means is that it now takes $20 to buy what cost $1 (ONE DOLLAR) thirty years ago! Some great accomplishment!!!

  2. What is the value of knowing what stocks someone sold nearly three months ago. By the time this information is public knowledge it is, at best, just useless history.

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Brad Hoppmann originally grew up in Florida, but has lived in Baltimore, Charlotte and New York as well throughout his career. Always an athlete, he played varsity football and water polo at the University of Florida and received All-SEC/SCC honors.