24/7 Insights:

• Warren Buffett’s Berkshire Hathaway stock holdings have a market value of $370.8 billion dollars.
• Berkshire currently allocates more than 40% of its portfolio to Apple, holding more than 5% of the company’s stock. 
• Buffett did trim his stake in Apple this past quarter by xx%, but AAPL stock still makes up more than 40% of the conglomerate’s overall portfolio. 
• Access 2 legendary, high-yield dividend stocks Wall Street loves.

Apple (NADSAQ: AAPL) is an easy company for investors to understand. Most U.S. smartphone users own an iPhone, and those who don’t know someone who uses one. Among the few cult brands that continues to drive customer loyalty and ecosystem/network effects, Apple’s mix of products and higher-margin services has made this stock among the most coveted tech companies in the world. Now the second-largest tech company by market capitalization, Apple continues to be a top holding of many investors, including Warren Buffett.

Buffett’s Berkshire Hathaway (NYSE:BRK-B) currently holds more than 5% of all available Apple stock, good for a portfolio weighing of 40.5%, as per most recent estimates. This makes Apple by far Berkshire’s largest position, and suggests the Oracle of Omaha remains very bullish on the company’s long-term prospects. These numbers are provided by the CNBC Berkshire Hathaway Portfolio Tracker. 

Why It Matters

Warren Buffett remains one of the greatest investors of all time, and many with a long-term investing approach look to Buffett’s publicly-traded portfolio for guidance on how to allocate capital. His fund has been notoriously focused on a few stocks, with an anti-diversification approach many find compelling. Here’s why that matters for investors looking to take large long-term positions in stocks like Apple. 

Apple’s Underperformance Could Prove to Be Short-Lived

Investors who have bet against Apple for the better part of the past three decades have largely been disappointed. This is a company that’s proven its worth as a beacon of innovation in the tech sector, with product releases that have redefined certain tech categories. The most notable innovation brought forward by the company is its iPhone, with new models released each and every year promising key upgrades and unleashing a new wave of demand via an ongoing upgrade cycle from a loyal and affluent customer base.

This year’s upcoming iPhone refresh is bound to include a number of AI features investors are starting to pay attention to. We’re likely to see additional updates on the horizon, but investors bullish on the AI trend appear to be pilling back into Apple stock. Despite declining more than 10% this year at its trough, Apple’s stock price has since rebounded to near all-time highs. Now within 3% of its all-time high, there’s a good likelihood one solid day in the stock market could propel this stock to new highs, and make Warren Buffett even richer.

Now, it’s worth pointing out that Buffett did trim his Apple stake substantially this past quarter, announcing this move prior to the company’s annual shareholder meeting. Despite trimming shares by 13%, Apple’s continued buybacks year after year mean Buffett’s position could feasibly grow over time, assuming no further sales are announced in the coming quarters. 

Consumer Discretionary Stocks Could Still See Headwinds

Despite Apple’s potential AI-related tailwinds, it’s important to note that this is still the world’s largest consumer discretionary company. The reality is that consumers need a good reason to upgrade their iPhone, Mac or iPad. And while Apple is certainly likely to provide another wave of upgrades that will entice many consumers, it’s also true that we may see increased hesitancy among certain consumers as inflationary price pressures hit the lower and middle-income consumers hardest. 

If we do see a recession hit over the next year (which has been widely anticipated by many who follow the yield curve), Apple is a company with some clear headwinds to battle. The question is whether the company’s positioning and competitive advantage (what Buffett would call a moat) will more than offset these headwinds.

My Take

It’s my view that Apple remains a key option for investors seeking a portfolio staple during times of trouble. Yes, there are certainly potential headwinds to be factored in. And it’s entirely possible that if the overall market multiple declines in a recession, Apple’s valuation at more than 30-times earnings could come under pressure.

But I also think that the company’s status as a long-term buy-and-hold stock will remain intact. Until Warren Buffett moves on, there’s hope for the rest of us small retail investors. 

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