Why BUFFETT is investing in APPLE at USD120 to USD 175 and not at USD 6 in 2003?

Tuesday, 27 February 2018

Why BUFFETT is investing in APPLE at USD120 to USD 175 and not at USD 6 in 2003?

Greetings from Hitesh! It is always an opportunity to  learn lessons from great minds way of working. They do something unique time and again and challenge the conventional way of normal investor’s thinking. Buffett has always advocated buying shares when nobody buys and accordingly he should have bought the apple shares when it was USD 6 in 2003. Had he bought at USD 6, apple stock moved to USD 400 by 2012!! Close to 65 times money would have been made.

But BUFFETT is unique, and his mindset is also unique. Let us see WHY he did what he did?

On May 21, 16 we had written our first post on BUFFETT buying APPLE shares titled “Buffett bought APPLE share at USD 109 per share and the price came down to USD 93!! What NEXT? You can read the same on our blog, if you wish”.

How much BUFFETT invested in APPLE So far?

Berkshire's first purchase of Apple stock was relatively small -- at least when compared with Berkshire's top equity holdings at the time. Berkshire purchased 9.8 million shares of Apple stock, worth about $1 billion, in the first quarter of 2016. The position was initiated by one of his two investing lieutenants, Todd Combs or Ted Weschler, each of whom was managing about $9 billion at the time.

Buffett later said that it was this purchase by one of his lieutenants that got him interested in the stock. With far more money at his disposal than his lieutenants, Buffett quickly built up a much larger position in the tech company after looking into the stock. By the end of 2016, Berkshire owned 61.2 million shares of Apple, purchasing the stock between prices of $90 and $118. And then Berkshire really went all in, doubling its position in Apple during the first quarter of 2017.

Buffett has continued to be a buyer of Apple stock, purchasing 3.9 million additional shares as recently as Berkshire's third quarter of 2017.

In total, Berkshire's position in Apple stock has swelled to more 134 million shares, worth about $23.5 billion. Apple is now Berkshire's third largest equity holding, second to a $25.5 billion position in Kraft Heinz and trailing further behind a $28.6 billion position in Wells Fargo.

As said in the post of 2016, BUFFETT added in apple at all levels and today he is sitting on huge profit plus he is getting good dividend also.

But the question remains – WHY NOW?

Over the last 3 years, he has seen the loyalty of the customer, which is very big MOAT to the apple company’s future. Customers readiness to pay the high prices for its products makes BUFFETT comfortable to invest in the same.

As a rule, BUFFETT is not a very big fan of START UP investments. He always waits till company performs and when he is reasonably sure that company will perform in visible future also, then and then only he will invest. In this case he started investing at USD 120, invested till USD 90 to USD 175 in recent past. Today the price is USD 185. His average would be much below then the current price.

Rakesh followed the same strategy when he was adding TITAN from Rs.40 to Rs.900. Today his investment is plus by 20 times to last purchase price.

The normal guys always talk about LONG TERM investments but somehow, they are not able to follow the simple strategy of BUFFETT or RAKESH.

What is the MAIN LERNING in the above CASE?

1.  Buffett had patience to wait till the company performs.

2.  He also had the patience to wait till the price is proper. He did not buy when the price was USD 400 in 2012. As such he was always negative for TECH companies, but he is flexible enough to change the stand and add patiently while the share prices was going down.

3.  He waited till 2016 and added big time in just two years.

4.  Once convinced he increased his investments to USD 25 billion in short span.  Most normal guys will buy good companies in small quantity in the beginning but will not add as the company performance and price moves up. This is the biggest blunder.

What NEXT?

I have always tried to follow him while doing my personal investments and guided all my clients to follow him in their own capacities.

If you really want to make big money in Indian market and have patience to wait for 3 – 7 years, I suggest you be with us.

Have a GREAT INVESTMENT SUCCESS.

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.