Omaha: Warren Buffett’s Berkshire Hathaway Inc.
disclosed Monday that it had made a $1 billion bet on Apple Inc. stock earlier
this year, boosting the iPhone maker’s market value by more than $18 billion.
Shares of Apple rose 3.7 percent on the news, closing
up $3.36 at $93.88. Berkshire made its investment in the first quarter, before
the iPhone maker in April reported its first quarterly revenue decline in 13
years.
The investment was announced amid an increasing view
among investors that Apple may deserve a lower valuation because its heady
growth days may be over. However, Apple has a strong balance sheet and
management, attributes long favored by Berkshire.
“It makes sense because it’s a consumer company
disguised as a technology company with a great business model, strong cash flow
and a cheap valuation,” said Jeff Matthews, author of books about Buffett and a
principal at the Ram Partners LP hedge fund. “It’s not a leap of faith.”
In a regulatory filing detailing most of its stock
holdings, Berkshire said it held 9.81 million Apple shares worth $1.07 billion
as of March 31.
The value of the stake has since fallen to about $921
million, even with Monday’s gain. Berkshire’s largest technology bet has been
Buffett’s roughly $12.1 billion stake in International Business Machines Corp,
an investment now more than $1.6 billion in the red.
Apple stock “is stunningly cheap, and it has a massive
pile of cash,” said Steve Wallman, founder of Wallman Investment Counsel in
Middleton, Wisconsin, who has owned shares of Berkshire since 1982 and Apple
since 2003. “Apple is not getting credit for research and development it is
doing behind the scenes.”
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