Berkshire Hathaway bought an additional 75m shares of Apple in the first quarter, while dumping its remaining stake in IBM, chairman Warren Buffett said in a CNBC interview.
The Apple purchase, which would have cost between US$11bn and $14bn, adds to the almost 170m shares that Berkshire Hathaway owned at the end of 2017, when it was already Buffett’s biggest shareholding. The added stake would see Berkshire overtake State Street to become Apple’s third largest investor, according to data compiled by Bloomberg. The move is paying off so far, with Apple shares climbing to a record.
Buffett’s announcement comes just days after Apple reported quarterly sales and profit that topped analysts’ estimates on surging services as revenue rose at the fastest pace in more than two years. The results helped end a recent swoon in Apple shares amid concern its flagship iPhone X model was struggling to win consumers.
“It is an unbelievable company,” Buffett said in the interview. “The idea of spending loads of time trying to guess how many iPhone Xs or whatever it may be are going to be sold in a given three-month period of time, to me it totally misses the point.”
Buffett said he was “almost certain” that Berkshire owns zero shares in IBM after sales in the first quarter. The company held about two million shares of the technology firm at the end of 2017. Buffett has sold down his stake over the past year after saying his thesis was flawed when he ploughed more than $10bn into IBM in 2011.
Berkshire Hathaway is holding its annual meeting this weekend in Omaha, Nebraska. Buffett said the company’s exact holdings would be disclosed in a quarterly regulatory filing on Saturday.
While Cupertino, California-based Apple still gets more than 60% of its revenue from iPhones, services are playing an increasingly important role as growth in the overall smartphone market slows.
CEO Tim Cook sells a growing array of services through a base of more than 1.3bn Apple devices, including music, cloud storage, movies and apps. Revenue from services surged 31% to a record $9.2bn in the most recent quarter.
An Apple Music subscription costs $10/month (unless it’s on a family plan), and the number of paying users recently hit 40m. The middle tier for iCloud storage costs $2.99/month. The company now has 270m paid subscribers across applications and its own services, up by 100m from the same period a year ago. — Reported by Katherine Chiglinsky and Robert Fenner, (c) 2018 Bloomberg LP