Apple Is Mature Enough For Buffett

Apple

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What's going on?

The world’s most well-known investor has invested in the world’s most valuable public company: on Monday it was disclosed that Warren Buffett has bought about $1 billion of Apple stock! (Well, technically, Berkshire Hathaway, Buffett’s publicly traded investment company, made the investment.)

What does this mean?

Buffett typically owns companies that are mature and established – like Coca-Cola and Kraft Heinz. His investments tend to be in consistently profitable companies that are sure-bets to pay their stockholders cash each year (a.k.a. a dividend). Tech companies don’t usually fit that bill (prior to his investment in Apple, Buffett’s only tech investment was IBM). So his investment sort of gels with recent criticism of Apple that it’s no longer a “growth” company. But, in Buffett’s view, being old and steady can be a good investment.

Why should I care?

For the stock: Buffett’s investment helped Apple’s stock jump more than 3% on Monday. It seems that many investors are still prepared to follow the so-called Oracle of Omaha. An optimist might point out that Buffett has only just initiated a position and that he’s likely to buy more stock – which should give the stock price some support. A pessimist would argue that, so far, Buffett’s one tech investment has proved why he should steer clear of the sector: IBM has done much worse than the overall market since he first bought it in 2011.

For you personally: The world’s most famous stock picker is one of the world’s biggest proponents of “index funds.” Buffett has consistently argued that low-cost investment funds that simply track the overall stock market are the best way to invest in stocks for the vast majority of people (he’s even given this advice to Lebron James! – check out the video here).

Originally posted as part of the Finimize daily email.

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