Warren Buffett, the Chairman and CEO of Berkshire Hathaway, is widely known for his tried-and-true investment philosophy. His approach is grounded in simplicity, discipline, and a focus on businesses with durable competitive advantages.
Buffett’s strategy is centered on a few core principles, including:
These principles are reflected in some of Buffett’s longest-held investments:
Berkshire’s purchase of Apple marked a departure from Buffett’s usual pattern. By the end of 2016, Berkshire held more than $6.5 billion in Apple stock, a purchase likely made by Berkshire investment managers Todd Combs and Ted Weschler, but Buffet still oversaw. Unlike Buffett’s traditional holdings, Apple is a technology company, an area he historically avoided due to the rapid pace of disruption and uncertainty over long-term competitive advantages.
So what prompted this exception?
Apple launched its revolutionary iPhone in 2007, and by 2015, the iPhone accounted for roughly two-thirds of Apple’s sales. It had displaced earlier smartphones like the BlackBerry and firmly established itself as the premium choice in the global market, even though Android devices dominated in total units. Apple’s consistent release cycle and loyal consumer base created a near recurring revenue stream, reinforced by the broader Apple ecosystem of apps and services, which encouraged daily interactions and customer lock-in.
Under this lens, Buffett likely saw Apple as a business with the same enduring qualities as Coca-Cola and American Express: a strong brand, loyal customers, and predictable long-term earnings. Buffett was confident there would not be a technology disruption ending the iPhone’s status.
From 2016 through 2018, Berkshire continued to accumulate Apple shares, and by 2023, the position peaked at approximately $174 billion, representing almost 50% of Berkshire’s equity securities investments. The Apple position accounted for 22% of Berkshire’s market cap by the end of 2023. Since that time, Berkshire has trimmed the position, cutting the shares count from just over 900 million shares to 280 million shares. The position is roughly 20% of Berkshire’s equity securities investments and 5% of the company’s market cap.
Interestingly, from 2018 onward, Apple diversified its revenue and became less like a technology company. iPhone revenue fell from 62% in 2018 to 51% in 2024, while Services rose from 15% to 25%, reducing dependence on consumers upgrading their iPhones to the latest generation and providing a more stable earnings base. Market recognition of this diversification helped drive Apple’s price-to-earnings ratio from the mid-teens to around 30X, effectively doubling the valuation and reinforcing its importance in Berkshire’s portfolio.
While Apple is still a large position, there are several reasons related to strong portfolio management:
Ultimately, the reason for trimming might be the same reason the purchase was surprising: Apple is facing technological risk. Artificial Intelligence is the current technological breakthrough, possibly the most important in human history, with the potential to reshape the tech landscape. Apple is on the fringes of the AI revolution that is being driven by Alphabet, Meta, OpenAI and others. New technologies could shift the dominant consumer device away from the iPhone through AI-driven smartphones or new hardware such as AI glasses.
Despite the reduction, Buffett continues to hold Apple, recognizing its strong brand, premium products, and loyal customers. However, he has signaled that Apple is no longer the central driver of Berkshire’s investment portfolio, reflecting a balance between confidence in the company and prudent portfolio management.
Berkshire’s investment in Apple demonstrates Buffett’s ability to adapt his principles to exceptional circumstances: even a tech company like Apple can meet his strict criteria for brand strength, consumer loyalty, and predictable earnings. Yet, the careful trimming of the position also underscores his commitment to risk management, valuation discipline, and the timeless principle of buying strong businesses at sensible prices.
This commentary is for informational purposes only and is not intended to provide specific advice or recommendations. Data and other information referenced are from sources believed to be reliable and opinions are subject to change. All investments involve risks, including the loss of principal.
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