Berkshire halves Apple stake, boosts cash to $277B as it gets 'defensive'
reuters.com
reuters.com
I'm bullish on Apple stock because they could afford to go a very long time without huge wins, and still be wildly powerful and in control of the tech lives of a huge percentage of the population. Apple also iterates and polishes over time until it's the best, and they have plenty of time. Going bearish on Apple is a bad move IMHO.
But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment.
This depends on whether you are thinking short-term or long-term. Short-term, I don't know because at this point I'm exclusively a long-term investor (something I might should have mentioned in my original comment).
The current price (for a company as big and mature as Apple) is essentially a gauge of how bullish vs bearish big investors are feeling about the sector and the specific company. It may fluctuate up and down a little bit based on news and such, but long-term I expect it to do well.
What he described makes it both long term and short term a bad investment. But he seems uneasy what “buying at peak” is.
Warren Buffet's goals are not the same as those of someone who wants to maximize long term returns while also minimizing time and effort spent evaluating investment options.
Valuation absolutely matters, and buying when something is overvalued can irrevocably screw you over.
And that is on a broad market basis - individual companies can just flat out go bankrupt and cease to exist.
If you bought in ‘72 or ‘99 for instance, it was a very, very long time before you’d even be able to cash out neutral.
Agreed, but I would consider those different companies (particularly in '72). When dealing with a small or medium company, the approach is very different and I would very much agree regarding risk of overpriced. However at this point Apple is very blue chip and very different than their startup or almost bankrupt earlier versions of themselves. If Apple were a startup or side-company in the tech industry, I'd have a very different opinion regarding whether they are over-priced or not, and how much risk that would carry.
Which hey, maybe. But that is exceptionally rare in practice.
If it makes you feel better to assume anyone with a different opinion than you must be an unreasonable and uninformed idiot, then by all means go ahead thinking that, but I have little interest in engaging in a bad faith conversation.
- historical long-term PE ratio is 15
- lets bump it to 20
- lets bump it again to 25
- Apple is at 33
- either it grows gross profits (33/25) 32%, or its worth 32% less than it is now.
- revenue has been flat since late 2021
- gross profits have been flat since late 2021 and approximate ceiling of 27% achieved in 2012
- if we skip just one unprincipled bump, we're looking at 65% increase required in gross profits.
- "long term investor" is handwaving, not a virtue, thesis, or principle. it doesn't mean anything here other than "I strongly believe Apple can double sales while maintaining or growing profit margin" or "can the timeline be longer please? because on a long enough timeline I'll be right"
On the other hand few companies could have achieved such growth and it seems better to go with winners.
I'm not an expert at reading financial statements but it seems to me Apple could easily double their dividends and still be very profitable relative to other companies.
Surely moves like that should have some effect on stock price meaning there are more possibilities than "grow gross profits" or "worth less"
Apple has a PE of ~34, so that is ~3%. 30 year treasury bonds are averaging ~4% right now. So yeah, Apple would be a abysmal long term investment if you assume they do not continue to grow. Anything with a PE over 25 at this time must grow to be worth the investment.
my dumber answer is "only if dividends and buybacks exceed profit sustainably", which is an oxymoron eschewing extreme circumstances (taking on debt at that you won't pay back, or being offered debt at 0% interest despite the fact you're giving it away)
There's lots from there (ex. couldn't we pull that off? Bank doesn't know we're liquidating if we don't tell them) -- in general the abstraction finance uses is "is the rate of return higher than bonds?", which of course is true in the short run in this extreme of a scenario, but unlikely in the long run
The only risk here for buffet is the fed coming in with a huge rate cut or just suggesting it, or restarting QE in light of a market crash, which will give stock markets an insane boost (including apple)
It would be a very Buffett thing to do, because shares produce dividends per share, so increasing share count is its own strategy.
[https://www.fidelity.com/learning-center/trading-investing/s....]
That being said, I haven't studied economics and am very much a layman. So if someone wanna correct me, please do!
Sucked for California. Everywhere else was fine. But traffic was so much better in the bay so there's that silver lining...
See 'Are "Good Companies" Good Investments?' (references used in the description):
* https://www.youtube.com/watch?v=ZY_NFQNUr_k
The above is a summary of this podcast episode, 'The "Good Company is a Good Investment" Fallacy':
> It sounds reasonable to say that investing in the most popular companies would produce the best returns, but this is just not how asset pricing works. Today on the show, we unpack the ‘good company is a good investment’ fallacy. Before diving into the main topic, we kick off our discussion on the subject of index funds with Robert Wigglesworth’s Trillions. From there, we share some updates about custom indexing and home buying in Canada, along with the immense valuation of Tesla as well as Elon Musk’s net worth. This acts as a great segue into the focus of today’s show: a so-called good company has high historical returns, strong earnings growth, strong forecasted earnings growth, and high prices. But just because the good companies have done well historically, this does not mean they will continue to be a good investment. In fact, there is a premium that says that higher-priced stocks earn lower returns than lower-priced stocks and value stocks. We unpack several papers that explore the concept that it is the lesser-known companies that tend to have better returns. We also get into how growth extrapolation, the skewness effect, and the big market delusion plays into the good company is a good investment fallacy. Our discussion concludes with the idea that investors are better off paying attention to expected returns rather than falling victim to extrapolation errors. Tune in today!
Disagree with the first sentence, fully agree with the last. My read/feel on expectations right now is that Apple has generally lower expectations from institutional investors than what is warranted, certainly from Berkshire. Berkshire certainly isn't bailing, but there's clear indications that Apple isn't expected to be the rocket ship they previously thought it would be.
I also think the US and EU markets are so big that they've got time (and plenty of money) to figure out Asia and Africa.
Apple's size/moat is one thing. That will last them for years to come, in no small part because the competition is dog shit (Windows is an ad ridden hellhole that constantly enshittifies itself with each generation, and Linux, well, every year has been "the year of Linux on desktop" for like two decades now?).
But there isn't much potential for true growth in their existing product categories either, and this is IMHO why Buffett is dropping such a large stake. Western markets are pretty much saturated, India/China's population parts that can afford Apple stuff just as well, and for other markets Apple is just too high a price point. Making that worse is that the Apple Vision, the first entirely new class of product in years, has utterly and miserably flopped.
> Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me.
Depends which part of macOS they're mostly using... if it's mostly a web browser, Terminal and IntelliJ, VSCode or whatever, switching is relatively painless. The challenge is hardware support, and a bunch of stuff isn't supported by Asahi Linux.
For the person I saw, it wasn't the OS itself really that was the problem. For him it was the integration with his iPhone, watch, his magic trackpad, Home Pods, and some apps and other digital goods that he had purchased that became hard to consume. There weren't any hard deal breakers, but so many thousands of paper cuts that it became overwhelming (which as I understand it, is exactly the strategy Apple is pursuing).
Mac sales account for only around 8% of Apple’s revenue.
I’ve been using Linux since 1996 and Linux on the desktop has been and continues to be a disaster. It’s only good for two things, opening a terminal or a web browser.
You can be a great company with great leadership and great products. You can't defy the laws of the "S" curve and market saturation. It doesn't matter how good you are. This is why Buffett and Co. are unloading. I wouldn't be surprised if it all gets sold by the end of the year.
EDIT: I called this sale two weeks ago in a tweet:
This just means that we should be getting a short term market correction. The ones that have benefited off of the hype are the Big Tech incumbents that will be just fine and those who dumped their skyrocketing shares on retail, which includes the folks at Nvidia.
At this time, some stocks and most AI startup valuations are extremely inflated and must correct and go down.
Also I don't think you can dismiss AI as pure hype like you can with e.g. web3. Clearly there have been and continue to be amazing and useful advances.
Selling near all time highs = being fearful while others are being greedy.
If not, then he has enough cash to buy/support the next big thing.
If I win this bet, I'll gain small satisfaction, and my all-index-fund portfolio will be, I don't know, just fine?
edit: typo
More discussion: https://news.ycombinator.com/item?id=41147381
Apple followed Meta into VR/AR without a killer app.
VR/MR I'll give you though. The weird thing there is that games are clearly the only (non-porn) application for VR that has any kind of real-world appeal, and Apple went in completely the opposite direction.
In my opinion, their bet on proprietary ARM chips was a success. They're a full generation ahead of Qualcomm, and they were able to successfully market their laptops based on superior battery life far before the Windows market caught up (which they're just starting to do now). That bought them a big lead.
But more importantly, they now have in house experience designing chips that will be an advantage if they want to innovate in new categories.
They should focus on the user experience, not chips.
For example, they let Siri languish for decades. Apple was glued to the hands/eyes of consumers, but neglected to train an AI/ gather meaningful data to improve their product.
Now they are playing catch up with Apple Intelligence.