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Warren Buffett: Was Investing in Apple another Mistake?

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Apple

The world’s largest tech company, Apple (AAPL), is set to register one of the worst quarterly losses in its stock in the fourth quarter this year. As of December 28, the company’s stock had lost about 30.8% against 14.7% and 18.2% losses in the S&P 500 benchmark and the NASDAQ Composite Index (QQQ)(VTI). By comparison, Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), NVIDIA (NVDA), and Netflix (NFLX) have lost about 12.2%, 26.2%, 13.3%, 52.4%, and 31.6%, respectively, in the fourth quarter so far.

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Warren Buffett’s investment in Apple

At the end of the third quarter, Apple was the largest single holding of billionaire investor Warren Buffett’s Berkshire Hathaway (BRK.B). In the third quarter, Buffett’s investment company bought about 522,902 more Apple shares. It owned about 252.5 million Apple shares in total. At the end of the third quarter, Berkshire’s stake value in Apple rose to $56.99 billion, up 22.2% from $46.64 million in the second quarter.

In October, Buffett, the “Oracle of Omaha,” called the iPhone “enormously underpriced” in an interview with CNBC. However, Buffett has also been prompt in accepting his investing mistakes, especially in the tech sector.

In 2017, during Berkshire’s annual meeting, Buffett discussed his failure with IBM (IBM). He said, “I thought it would do better in the six years that have elapsed than it has.” While trying to justify his investment in Apple instead of IBM, he noted, “Apple—I regard them as being quite a different business.” Buffett added a note of caution here, saying Apple “has a huge tech component in terms of what that product can do or what other people might come along to do to leapfrog it in some way. No guarantees, but I think I’ll end up being one for two instead of ‘O’ for two. But we’ll find out.”

During Berkshire’s 2018 annual meeting, Buffett also commented, “I was too dumb to realize. I did not think [Bezos] could succeed on the scale he has” and that he “really underestimated the brilliance of the execution,” CNBC reported.

While Apple could seem attractive as an investment after its recent declines, the declines might cause Buffett’s company huge losses in the fourth quarter if it didn’t make any changes to the position during the quarter.

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