For BUFFETT, BITTEN APPLE turned out to be a BEATEN APPLE. What it means for normal investors?

Friday, 04 January 2019

For BUFFETT, BITTEN APPLE turned out to be a BEATEN APPLE. What it means for normal investors?

Greetings from Hitesh! Apple as a logo of BITTEN APPLE. Today for many investors it turned out to be a BEATEN APPLE, including BUFFETT. Let us see what it means for NORMAL GUYS.

Apple shares prices have come down from around USD 233 in October 2018 to around USD 142 yesterday. The loss is around USD 90 or 39% from the top.  

How it affected BUFFETT at this moment?

The above fall has taken away close to USD 15 Bln from the portfolio value of Berkshire. As per their accounting norms they will have to adjust this NOTIONAL LOSS against their profit and that will affect the book value of BERKSHIRE SHARES and it’s earning. Their business earnings, which is soaring, will come down due to this sell off in apple shares.  

When BUFFETT started adding APPLE?

He started buying around USD 112 and it fell to USD 93. I have written blogs on the same in the past.  He was continuously adding from USD 120 to USD 175. The share might be at this average purchasing price as of now. He may not be in loss at USD 140 or with little loss on actual purchase price basis. 

What is the learning for NORMAL investors?

1.  Just because you have bought fundamentally strong company – it’s share price may not continue to move up. You need to be ready to take the pain of seeing prices going down. If you are not ready for this pain – don’t invest in stocks.

2.  You need to have a fairly long-term view to get the best out of the company’s growth. Let me share COCA COLA share BUFFETT purchased. He was adding from 1987 to 1994. His average price was USD 3.25. Today COCA COLA is quoting at USD 46. The most interesting aspect is the dividend income he is getting every quarter. He has 400 million shares. He is getting USD 1.50 per year as dividend from the company. It means every year he is getting back 50% of his investments back or every year his investment is generating 50% return in dividend only. Do you think Coca Cola share prices would have moved in one way in last 30 years?

3.  Rakesh was also adding Titan shares from Rs.40 to Rs. 900. In fact, between JAN – MAR 2018, he had added the fresh quantity of TITAN. The point is investment has its own pain of price fluctuations. You need to be ready to bear that.

4. However good is your study of any company, company management or company products – market is the king and market can always surprise you – even if he is BUFFETT. Respect the market judgement rather then blaming it. BE HUMBLE.

5.  Buffett kind of investors bets on the business model and habit / consumption kind of investment companies. Apple, though it is a TECH company, is a HABIT product for customers. This is the most important saving grace for BUFFETT and he knows that if people love APPLE products, performance will improve sooner than later, and share prices will join the party. Apple is giving him USD 2.80 as dividend. On his average price of USD 140, the dividend yield is 2% which is not bad considering USA FD rates.

6.  Who knows Buffett may be adding shares of apple at this level. We will have facts in his half yearly filing to SEC in MARCH 2019.

What NEXT?

Big gains are not possible without Big pains. If you have got tons of money by stroke of luck, rest assure, it will go away with another stroke of bad luck. So, learn to take pain. Have patience and be humble. Market will reward you and that reward will stay with you and your generations.

Have a great investment experience.

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

Live With Passion…Invest With Passion.

Hitesh Parikh.