Warren Buffett, Chairman and CEO of Berkshire Hathaway Inc
The India Today Group | Getty Images
Warren Buffett said he now views tech giant Apple as one of the four pillars powering Berkshire Hathaway, the conglomerate of mostly old-economy companies he’s amassed over the past five decades.
In his annual letter to shareholders released Saturday, the 91-year-old investment legend referred to Apple as “Our Four Giants” and even named the company the second most important after Berkshire’s cluster of insurers, thanks to the CEO.
“Tim Cook, Apple’s brilliant CEO, rightly considers users of Apple products his first love, but all his other constituencies also benefit from Tim’s management approach,” the letter read.
The “Oracle of Omaha” made it clear that he’s a fan of Cook’s share buyback strategy, and how it gives the conglomerate more ownership of every dollar of the iPhone maker’s earnings without the investor having to lift a finger. stabbing.
“Apple — our runner-up Giant as measured by year-end market value — is a different kind of asset. Here, our ownership is just 5.55%, up from 5.39% a year earlier,” Buffett said. in the letter. “That increase sounds like small potatoes. But remember that every 0.1% of Apple’s revenue was $100 million in 2021. We haven’t spent Berkshire funds to get our gains. Apple’s buybacks have done the job. “
Berkshire began buying Apple stock in 2016 under the influence of Buffett’s investment executives Todd Combs and Ted Weschler. By mid-2018, the conglomerate had built up 5% ownership of the iPhone maker, a stake that cost $36 billion. Today, the Apple investment is now worth more than $160 billion, accounting for 40% of Berkshire’s stock portfolio.
“It’s important to understand that only Apple dividends are counted in the GAAP revenue Berkshire reports — and last year Apple paid us $785 million of that. Yet our ‘share’ of Apple’s revenue was a whopping $5 .6 billion. Much of what the retained company was used to buy back Apple stock, an act we applaud,” Buffett said.
Berkshire is Apple’s largest shareholder, outside of index and exchange-traded fund providers. The conglomerate has received regular dividends from the tech giant over the years, averaging about $775 million a year.
Railway and energy
Buffett also named his rail company BNSF and energy segment BHE as two other giants of the conglomerate, both of which posted record profits in 2021.
“BNSF, our third giant, remains the main thoroughfare of US commerce, making it a vital asset for both America and Berkshire,” Buffett said. “BHE has become a powerhouse and a leading force in wind, solar and transmission across much of the United States.”
Berkshire’s operating income rose 45% in the fourth quarter, on the back of continued recovery of rail, utility and energy companies from the pandemic.
Buffett bought back a record $27 billion worth of Berkshire stock in 2021 as the investor continued to favor internal opportunities in an increasingly expensive market. Berkshire’s money stack stood at a near-record $146.7 billion late last year.