Buffett's Berkshire Takes $1 Billion Position in Apple -- 5th Update
May 16 2016 - 10:43AM
Dow Jones News
By Lauren Pollock
Warren Buffett's Berkshire Hathaway Inc. took a new $1 billion
position in Apple Inc. in the first quarter, a move that comes as
the technology giant's shares have been battered amid a slowdown in
iPhone sales.
The legendary investor's firm reported owning 9.81 million
shares of Apple as of March 31, worth about $1.07 billion. But the
value of that investment has already dropped significantly after
the company reported its first quarterly revenue decline since 2003
last month.
Mr. Buffett, who for years avoided technology stocks, previously
professed to not understand the sector and had argued that it is
difficult to defend its competitive advantages. Mr. Buffett's
record has been built on investments in insurers, financial
companies and industrial businesses, including household names like
Coca-Cola Co. and American Express Co.
His firm hasn't avoided technology completely, however, taking a
position worth more than $10 billion in International Business
Machines Corp. in 2011. Berkshire slightly increased that stake
again in the first quarter.
Berkshire is also said to be backing a consortium vying for
Yahoo Inc.'s Internet assets that includes Quicken Loans Inc.
founder Dan Gilbert, according to Reuters and other media outlets.
Such a move would mark another investment in an older tech
name.
In Apple, Berkshire likely saw a buying opportunity as the
shares are off sharply from last summer's highs as the company
struggles to maintain the sales surge that followed the
introduction of its larger-screen smartphones in late 2014. The
2015 successors to those initial big-display models haven't
garnered as much enthusiasm from consumers.
Apple traded above $130 a share last July and ended the first
quarter at $108.99 before continuing to fall. The stock got a
bounce in morning trading on Berkshire's investment, rising 1.8% to
$92.10.
Berkshire's positions were disclosed in a 13F filing with the
Securities and Exchange Commission, a quarterly requirement for
investors managing more than $100 million. The report indicates the
number of shares held and the value of each stake at the end of the
quarter, so it isn't clear if Mr. Buffett's firm has continued
buying the stock since the quarter ended.
Berkshire's investment in Apple -- the firm's only new position
taken in the quarter -- follows the exit of another well-known
investor, Carl Icahn, who said last month he had sold his big
stake. He told CNBC at the time that Apple is a great company but
no longer a "no-brainer" as an investment choice. Mr. Icahn made
his initial investment, reported to be worth about $1.5 billion, in
2013. He subsequently bought more shares and called for the company
to boost its stock buybacks.
As for IBM, Berkshire bought 198,853 shares in the first
quarter, bringing the total value of its position to $12.3 billion.
IBM is one of Berkshire's big four investments, along with Kraft
Heinz Co., Wells Fargo & Co. and Coca-Cola Co. Those three
positions were unchanged in the first quarter.
Berkshire, meanwhile, continued to bet on Phillips 66,
increasing the size of its investment by 23% to $6.5 billion. The
firm eliminated its position in AT&T Inc., which it had pared
in the previous quarter as well. Mr. Buffett had been a large
investor in DirecTV, which AT&T bought last July.
The firm also exchanged most of its $4.2 billion position in
Procter & Gamble Co. in the quarter to buy battery maker
Duracell. That deal, which was originally unveiled in late 2014,
involved swapping stockholdings for a business that can generate
cash and expand Berkshire's earnings base without paying hefty
taxes. The firm's remaining position in the maker of Gillette
razors and Pamper diapers was about $26 million at March 31.
Write to Lauren Pollock at lauren.pollock@wsj.com
(END) Dow Jones Newswires
May 16, 2016 10:28 ET (14:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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