Warren Buffett praises his favorite stock Apple: Better than any other Berkshire investment

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• Buffett thinks Apple is the best Berkshire investment
• Reference to pricing power, customer loyalty and dividends
• Munger without concerns about lack of diversification

Warren Buffett is the poster child of value investing. With this strategy, which is essentially based on identifying undervalued stocks with future potential and holding them for the long term, the 92-year-old has enjoyed decades of success and has become an investor icon. Meanwhile, Buffett has few points of contact with the tech sector – even though the largest investment by his investment holding Berkshire Hathaway is the iPhone manufacturer Apple and thus an established tech giant. At the recent shareholders’ meeting, the star investor made it clear why investing in Apple is superior to all other Berkshire investments.

Apple is Berkshire’s best investment

When asked if he considered it a risk that the Berkshire portfolio was 35 percent Apple, he replied, “Apple doesn’t make up 35 percent of a Berkshire portfolio. Berkshire’s portfolio includes the railroad and energy companies, Garanimals, like you name it, See’s Candies – they’re all businesses.”

Nevertheless, he is apparently more than satisfied with his holding company’s top investment: Apple is simply “a better company than any other company we own”. Berkshire has invested a lot of money in Apple, but “no more than in the railroad,” which is also good business, but “not remotely” like Apple.

Apple benefits from customer loyalty and pricing power

In particular, Buffett pointed to the loyalty that customers show to the company and the pricing power that Apple believes it has. “Apple is in a position with consumers where they’re paying $1,500 for a phone,” Buffett said. It is also the same target group that would spend 35,000 US dollars for a second car – although the investor was convinced that they would rather do without their second car than their iPhone. “I mean, it’s an exceptional product”. One is “very, very, very happy” to have 5.6 percent of the Apple shares “and we are happy about every tenth of a percent that increases.”

Apple rewards its shareholders

Another reason Buffett is comfortable with Berkshire’s Apple investment is that the company consistently pays a dividend. Apple regularly pays several million US dollars to Berkshire Hathaway – the iPhone manufacturer now pays 24 cents for each share held. The investment company recently had around 895 million Apple shares in its portfolio – the company therefore receives almost $214 million from Cupertino – without Berkshire having to part with Apple shares.

Is Apple’s share too big?

Apparently, Berkshire’s management does not fear that the large Apple stake could pose a threat to Berkshire Hathaway. Buffett business partner Munger said at the shareholder meeting, “One of the crazy things that modern college education teaches is that deep diversification is imperative when investing in common stocks,” Munger said. He thinks this is a “crazy idea” given that it’s not that easy to find a wide range of good options. “And if you only have three, I’d rather they were my best ideas than my worst,” Munger continued. Some people can’t tell their best ideas from their worst and would think investments are better than they actually are. “I think we make fewer mistakes like that than other people, and that’s such a blessing for us,” said Munger confidently.

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