Warren Buffett Builds An $18 Billion Apple Stake, Creating A ‘Big Seven’ At Berkshire Hathaway – Forbes
Five years ago, Warren Buffett touted his ‘big four’ stock bets when building a $10.7 billion stake in , a massive holding to go with long-term investments in , and . Now, after buying 120 million shares of over the past year, Berkshire Hathaway has a position in the iPhone-maker worth $18 billion and a ‘big seven’ of company stakes valued at over $10 billion.
On Monday morning, Buffett told CNBC’s Becky Quick Berkshire Hathaway doubled its Apple investment to 133 million shares in the first quarter, buying millions of shares before its record 2016 results, released at the end of January. Buffett was initially drawn to Apple by one of his investing lieutenants, either Todd Combs or Ted Weschler, who built a 10 million share position by the first quarter of 2016. After taking a liking to Apple’s gargantuan profits and high customer loyalty, Buffett decided to build a major stake.
“Apple strikes me as having quite a sticky product,” he told CNBC before praising CEO Tim Cook.
The position, already in the green by over a billion, means Berkshire Hathaway will receive about $300 million a year in Apple dividends, while the prospect of a tax repatriation holiday or broad-based tax code reform could push those returns far higher. It also greatly expands Berkshire Hathaway’s investments in the technology sector, albeit with a company that boasts the industry’s strongest and most ubiquitous brand. In his CNBC appearance, Buffett characterized Apple as a consumer product company, a type of investment that is his specialty.
Besides Apple, it’s time for Berkshire Hathaway investors to move beyond the ‘big four.’ In reality, Berkshire has seven major corporate bets.
In the summer of 2011, Buffett made a $5 billion capital infusion into then-ailing Bank of America and Berkshire picked up warrants to buy 700 million BofA shares for $5 billion. Those warrants, which expire in 2021, are now worth roughly $17 billion, meaning Berkshire’s holding after conversion would be worth about $12 billion. In his annual letter, Buffett explained that BofA’s annual dividend rate exceeded 44-cents, Berkshire would likely do a cashless exchange of its preferred shares into common stock.
To boot, Berkshire’s partnership with Brazilian private equity giant 3G Capital has yielded yet another mammoth investment.
Four years ago, Buffett and 3G partnered on the $28 billion takeover of Heinz, with Berkshire providing preferred financing and making a large equity investment in the deal. Then in 2015, Heinz struck a deal to buy Kraft Foods for about $40 billion in cash and stock. The deal created a new company, Kraft Heinz, listed on the New York Stock Exchange and Berkshire again played financier. In total, Berkshire has invested $9.8 billion for its Kraft Heinz shares, but the holding is now worth in excess of $30 billion.
Buffett hasn’t altered his so-called ‘big four’ in recent years. But with the addition of a major Apple holding, a savvy capital infusion into BofA, and Berkshire’s immensely profitable partnership with 3G Capital, the ‘Oracle of Omaha’ now has a ‘big seven.’
(Full Disclosure: I own some Berkshire B-shares in a retirement account)