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Apple and Warren Buffett Have Similar Issues

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Jan. 11 2019, Updated 9:35 a.m. ET

Apple

Berkshire Hathaway (BRK-B) was Apple’s (AAPL) second-largest shareholder at the end of the third quarter. Warren Buffett, Berkshire Hathaway’s chairman, started buying Apple in 2016. Buffett added more shares in the third quarter. Apple is Buffett’s second bet in the technology sector after IBM. Although Buffett sees Apple as a consumer products company, for practical reasons, Apple can be classified as a mix of technology and consumer products.

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Technology companies

Technology hasn’t really been Buffett’s hallmark. He avoided technology stocks in the boom in the 1990s. At that time, most of the high-flying tech stocks turned out to be fads. Apple stock was looking strong until the last quarter. Apple stock beat the $1 trillion market capitalization last year. However, the stock’s market capitalization fell below $700 billion in December—the lowest level since 2017. Based on the closing prices on January 10, Amazon (AMZN) was the largest company by market capitalization. Microsoft (MSFT) and Alphabet (GOOG) are the other companies in the race for the biggest company tag.

Apple and Buffett have similar issues. They both have lots of cash. Apple and Buffett have enviable reputations to protect. While Buffett has gained a reputation for his value investing and beating markets over the long term, Apple has a reputation for bringing innovative products.

While Apple and Berkshire Hathaway have huge amounts of cash, their approach to capital allocation is different.

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