Last week, Alphabet managed to jusssst slip past Apple to become world’s most valuable company. But as history has it, the joy remained for a brief period, thanks to Berkshire Hathaway’s $1 Billion investment announcement, ultimately resulting in a 3.7% increase in Apple’s share prices, followed by a regain of the top position.
In a regulatory filing, the investment firm owned by Warren Buffet disclosed that it had bought over 9.81 million Apple shares valued at $1.07 billion.
The investment was done before Apple reported its quarterly financial results — the same results which created an air of investor pessimism around Apple. However, the faith of a firm like Berkshire has boosted Apple’s vlaution by more than $18 billion leading its stocks to increase by 3.7% to $93.88 valuing Apple at about $514 billion.
Jeff Matthews, the popular author of many Berkshire-related books commented on the Berkshire decision to invest in Apple and said,
Apple at the current valuation makes a ton of sense; it’s a consumer-product company more than a tech company.The company has a great financial model, a great brand name and a cheap stock.
Last week, the share value had fallen below $90 which led Google parent Alphabet to become the most valuable company. This was despite the fact that the Cupertino giant roughly records triple the revenue and profit of Alphabet.
The investment from Berkshire also comes as a surprise to many investors as Buffet has historically deterred from making investments in tech stocks.
An exception to this was the firm’s investments in IBM and AT&T out of which it recently exited AT&T selling stakes worth $1.1 billion. The IBM investment has also not performed according to expectations and is trading for less than what Buffett paid to acquire the stock.
The investment was reportedly done by one of Buffet’s two stock picking deputies namely Todd Combs and Ted Weschler. The two usually make smaller investment less than $1 billion while Buffet usually takes care of larger investments.
Paradoxically enough, some investors also think that Buffet’s investment may also signify that high growth days of Apple are over and it is on its way to becoming a more stereotyped yet profitable corporate powerhouse. This is because of Buffet’s strategy of investing only after considering long term consequences.
Overall though, most investors seem to have taken the announcement on a positive note which was evident from the effects on the stock market.