The 'Oracle of Omaha', Warren Buffett has often said that he avoids investing in the technology sector as he does not like to own stocks in companies whose business he does not understand. But on Monday, according to a filing for the first quarter made with the Securities and Exchange Commission, Warren Buffet's Berkshire Hathway owns 9.8 million shares in tech giant Apple as of March 31, which are roughly worth $1.07 billion.
Apple has so far had a 'roller-coaster' few weeks with a lot of surprises. Towards the end of April, Apple's stock took a hit after the company reported a 13 percent fall in quarterly sales, the first time its revenue declined in 13 years. Much of the falloff was attributable to the struggling Chinese economy, according to Fortune. So, in hindsight Apple's recent move of investing $1 billion in Uber's Chinese rival- Didi Chuxing doesn't come as a total surprise for strategic and technological reasons.
Warren Buffett, who doesn't own a smartphone, has professed to not understand the tech sector and had argued that it is difficult to defend its competitive advantages in a Wall Street Journal report. So at a time when Apple's stock has taken a beating, Buffett's investment officers, Todd Combs and Ted Weschler, have bought into the company.
In Apple, Berkshire likely saw a buying opportunity as the company struggles to maintain the sales surge that followed the introduction of its new iPhones in late-2014.
Buffet's firm hasn’t avoided technology completely, though. It took a position worth more than $10 billion in IBM in 2011. Berkshire slightly increased that stake again in the first quarter of 2016. Buffett’s record has been built on investments in insurers, financial companies and industrial businesses, including companies like Coca-Cola Co. and American Express Co.
Berkshire’s investment in Apple follows the exit of another well-known investor, Carl Icahn, who said last month he had sold his big stake, according to WSJ. Apple's shares rose 1.8 per cent to $92.19 in early trading in New York after Berkshire Hathway disclosed its investment.
Berkshire Hathway has a track record of being a long haul and patient investor, so the firm's forecasts likely predict a bright future for Apple with its new products and moonshot projects like driverless cars. As Apple's growth is expected to be stagnant in western markets in Q1 2016, its sights are probably set on high growth Asian markets like India and China. This is apparent from the recent investment in Didi Chuxing, which could help Apple gain favour with the Chinese government.
Apple has also been trying to push for growth in India and most recently offered a rental facility for its newest phone. Reports also suggest that CEO Tim Cook will be meeting Prime Minister Narendra Modi during the course of this week. It will be interesting to see how Apple navigates markets that are foreign to them and if Berkshire Hathway's faith in Apple pays off in the long term.