Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), bears responsibility for “major investment decisions and all major capital allocation decisions” made by the company, according to financial filings with the Securities and Exchange Commission.
With that in mind, Berkshire sold 116 million shares of Apple (NASDAQ: AAPL) in the March quarter, reducing its stake by 13%. Apple still accounts for 40% of its $336 billion portfolio, but the company has now trimmed the position in two consecutive quarters. Meanwhile, Buffett purchased another mega-cap stock he believes will outperform the S&P 500 (SNPINDEX: ^GSPC) index.
Read on to learn more.
Apple: The stock Warren Buffett was selling
Apple benefits from brand authority and pricing power. Its ecosystem of appealing hardware, proprietary software, and integrated services creates a user experience for which people will pay a premium. Indeed, 80% of iPhones are priced above $800, while just 22% of Samsung (Android) smartphones are in the same range, according to the International Data Corporation (IDC).
Apple has a particularly strong presence in the smartphone market. The iPhone accounted for 20% of smartphone shipments by volume last year, up from 14% in 2019, according to IDC. But Apple also has a strong presence in the tablet, personal computer, and smartwatch markets, among other consumer electronics verticals. In total, its installed base exceeds 2.2 billion active devices.
Apple monetizes its installed base with adjacent services. That includes fees for iCloud storage, App Store downloads, and subscription products like Apple TV+, as well as advertising and financial services like Apple Pay. Importantly, Apple’s greatest growth prospects lie in services, because services revenue is growing more quickly than hardware revenue and services earn higher margins than hardware.
Apple reported disappointing financial results in the second quarter of fiscal 2024 (ended March 30). Revenue fell 4% to $90.8 billion due to a 10% decline in iPhone sales offset by a 14% increase in services sales. Meanwhile, GAAP…
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