Amid the surge in instability around banking and financial stocks, high quality tech giant shares like Apple have become a sort of a safe haven for worried investors and there will be nobody happier than Warren Buffett and his Berkshire Hathaway company, the biggest single shareholder in the iPhone giant.
Quietly, Apple shares have surged in the first 9 weeks of 2023, jumping more than $US30 even though its December quarter financials were a bit weaker than forecast.
The gain – from $US125.07 to $US155.85 on Thursday (and a 2023 high) – has seen its value reclaim and move past the $US2.4 trillion level as of Thursday’s close.
Apple’s nearly 25% ($US400 billion) rise has happened while the S&P 500 is up less than 3.1% (after Thursday’s 1.8% jump), after being ahead 6.2% at the end of January.
Curiously, shares of Berkshire Hathaway, Apple’s biggest shareholder, haven’t been hoisted by the Apple surge – the key voting share of Berkshire is down 3% year to date.
Because of its big holdings of financials – Bank of America, Amex and smaller holdings of JPMorgan and Ally financial, Berkshire shares have been rattled by investor selling. Bank of America shares are off 13.5% year to date.
Since a recent low of $US148.50 last Friday in the midst of the Silicon Valley Bank debacle, Apple shares have risen by close to 5% to nearly $US156 in regular trading until Thursday.
More and more market analysts are saying investors are heading out of speculative tech stocks and banks and financials and heading into the mega caps like Apple (And Microsoft) for protection.
Microsoft shares are up more than 7% since last Thursday and 15% year to date – not Apple-like performance but better than what Credit Suisse or Bank of America have been through.
There’s also a feeling the Fed could postpone a rate rise this week because of the weak banking sentiment but the fact that the European Central Bank went ahead with a 0.50% rate rise on Thursday will probably see the US central bank lift rates next week.
But Apple and Microsoft shares ignored the ECB rate rise.
But there has also been an absence of any negative news from China and its Foxconn associate which handles much of the assembly of the iPhone and other key products,
China has re-opened after the draconian Covid control measures of President Xi sparked protests which erupted first at the huge Apple assembly factory complex in central China in October and November.
At the time and in January, Apple let it be known that it was looking to shift some of its production to India and perhaps Vietnam, but those stories have faded in the past month as have reports of unrest inside the country.
Foxconn is talking about a $US2 billion plant in India to build more Apple products.
Normally Warren Buffett and Berkshire Hathaway would be among the first names mentioned as a possible buy of distressed assets like a broken bank, but not so last week or Credit Suisse (though Bank of America led the $US30 billion rescue of First Republic bank on Thursday).
Perhaps that’s the real measure of how troubled those three US failures are and the depth of the problems at Credit Suisse. Buffett and Berkshire rescued Salomon Brothers in 1987 and got burned.
They ‘helped’ steady Goldman Sachs at one stage in the GFC and made money but the enthusiasm was nowhere as great at that shown in the help extended to Bank of America at the same time, which is now one of Buffett’s core investments.
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And quietly in the past month, Berkshire Hathaway has taken advantage of a slip in the value of Occidental Petroleum shares to load up on more than $US800 million more in the first but in nearly six months.
Berkshire Hathaway purchased nearly eight million shares of Occidental Petroleum in the past week days, bringing its stake to 208 million shares, or 23% of the big energy company, according to a regulatory filing late Wednesday night.
Berkshire Hathaway bought the shares from Monday through Wednesday at prices ranging from $US56 to $US61 a share. The cost – around $US475 million
That was a fortnight after Berkshire told the SEC in a filing that it had bought nearly 5.8 million shares of the oil company in a few separate trades on Friday, Monday and Tuesday, paying prices in the range from $US59.8 to US61.9.
Berkshire also owns $US10 billion of Occidental preferred stock, and has warrants to buy another 83.9 million common shares for $US5 billion, or $US59.62 each. The warrants were obtained as part of the company’s 2019 purchase of Andarko Petroleum back in 2019 for $US37 billion.
If that option was exercised, Berkshire’s stake would rise to nearly 30%.
Occidental is now among Berkshire’s top 10 holdings.
The company was the best performer last year in the S&P 500, more than doubling in price because of higher oil prices in the wake of the Russian invasion of Ukraine and the constant buying by Buffett which started before the invasion a year ago.
