Berkshire Hathawaythe group of companies of the legendary investor Warren Buffettbets on dozens of Actions to obtain great benefits over time. However, not all managed to be as profitable as the number one of the portfolio: Apple.
In the first quarter of 2016, Warren Buffett made one of the best decisions of his career: starting an Apple position, the iPhone manufacturer and iPad.
With the benefit accumulated since then, almost 800%that play proved to be a true strategic success. But beyond performance, the case of Apple offers valuable lessons about the criteria that a company must meet to pass the demanding Buffet Investment filter.
Why Warren Buffett bought Apple shares
The Berkshire portfolio is mostly composed of Companies with robust brands and global recognitionbut few compare with Apple’s strength, whose user base is massive and deeply loyal. For this reason, it occupies the 22% of its portfolio.
Its consumers enthusiast every new launch for having a Emotional link with the brand which was key to sustaining its leadership in the Premium segment of consumer electronics.
This fidelity also translates into an exceptional price setting power, a quality that Buffett especially values. Although Apple does not dominate in smartphones sales volume, it does concentrate a disproportionate portion of the sector’s profitslargely driven by the profitability of the iPhone.
One of the most perfect companies
Warren Buffett also looks for companies with a unquestionable financial healthand Apple generates a notable free cash flow every quarter. In addition, in the last five years, it maintained an average operating margin of 30%, a metric that reflects both efficiency and scale.
Of course, even the best business may not be a good investment if the price is too high. But in 2016, Apple quoted a multiple Price-Ganance (PE) Average only 10.6a modest assessment considering the strength of its brand, its ability to generate benefits and its competitive domain.
Today, the technological giant is the third largest company in the worldwith a value of US $ 3.2 billion, and even became number one for a long time before the rise of Microsoft and Nvidia.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
