Is Warren Buffett’s love affair with Apple a case of (non) buyers remorse because he failed to spot the mega tech boom – especially the successes of Google (Alphabet) and Amazon?
Buffett rued his miss on those two companies at Saturday’s Berkshire annual meeting in Omaha, where he again strongly endorsed Apple.
His remarks came a day after he revealed Berkshire Hathaway had bought 75 million more Apple shares in the March quarter, sending Apple shares to new highs and topping the $US900 billion mark value. Apple shares ended the week up 13.3%, the biggest weekly rise for more than six years.
The week started with Apple revealing a better than expected March quarter profit and a new $US100 billion share buyback on top of the existing one which ends in June with the repurchase of $US210 billion of shares, and ended with two days of bullish comments from Buffett.
Berkshire now owns roughly 240 million Apple shares. The value of Berkshire’s stake jumped from $US40.7 billion at the end of March (and $US28.2 billion at the end of December, 2017) to more than $US44 billion with the purchases and is now Buffett’s single biggest investment – all since the first purchases two years ago.
Buffett doesn’t view Apple as a tech stock only, from previous comments (as recently as Friday) it is clear he also sees the company as a consumer products giant with well over 1.3 billion people using an Apple product or service around the world.
Buffett told the meeting he would be happy if Berkshire owned more than 5% of Apple, including if the iPhone maker bought back more of its shares.
“I’m delighted to see them repurchasing shares,” Mr. Buffett said. “We own 5 percent of it. With the passage of a little time, we may own 6 or 7 percent because they repurchase shares.”
Berkshire Hathaway vice chair, Charles Munger added that he and Mr. Buffett don’t approve of every buyback plan, but he doubted Apple would find an acquisition target at a good price.
“The reason companies are buying their stocks is that they are smart enough to know it’s better for them than anything else,” Mr. Munger said.
This Apple love fest was in contrast to the wistfulness of missing out on riding the success of Google and Amazon.
This enthusiasm can be measured against his remarks about missing Google and Amazon.
“I made the wrong decisions on Google and Amazon” he said told the meeting.
"We’ve looked at it. I made the mistake in not being able to come to a conclusion where I really felt that at the present prices that the prospects were far better than the prices indicated.”
Buffett said it had taken Microsoft co-founder Bill Gates (a Berkshire director who was in the audience) to tell him to stop using Altavista as a search engine and use Google instead.
And he should have been more aware because Berkshire subsidiary Geico was paying Google “a lot of money" at the time of its initial public offering.
Buffett admitted he underestimated Amazon’s ability to disrupt retail and cloud computing at the same time with such a rapid pace.
"I had very very very high opinion of Jeff’s [Jeff Bezos, CEO of Amazon] ability when I first him, and I underestimated him," he added. "I’ve watched Amazon from the start. I think what Jeff Bezos has done is something close to a miracle … The problem is when I think something will be a miracle, I tend not to bet on it. It would have been far better obviously if I had some insights into certain businesses.”
Interestingly, Buffett was also asked why Berkshire hadn’t invested in Microsoft – the Sage told the meeting it was his mistake the company missed Microsoft and now he felt he could not do any deals because of friendship with Gates.
“In the earlier years, the answer is stupidity," Mr. Buffett explained to the meeting while Berkshire had missed Microsoft.
But he added that since Bill Gates has become a personal friend, it would now be a mistake to own any shares. He says he has even told his fund managers not to buy any shares.
Why? Well Mr. Buffett fears he and Mr. Gates would be the target of accusations that Mr. Gates had leaked information if Microsoft did big deals and it became known Berkshire had dealt in Microsoft shares before any announcement.
“I try to stay away from a few things just totally because the inference would be drawn," Mr. Buffett explained to the meeting.
