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Apple is the second of Berkshire Hathaway’s “Giant Four” value-defining investment firm, Warren Buffett pointed out, with the iPhone maker trailing only a “cluster of insurers” in importance.
Warren Buffett is closely linked to Berkshire Hathaway’s part-ownership of Apple and is a big fan of the tech giant. In an annual letter to Berkshire shareholders, Buffett again praises Apple, as well as CEO Tim Cook.
The letter is an annual offering from Buffett and Berkshire Hathaway, and has repeatedly been adored by Apple.
Described as “our second giant” by Buffett, as measured by its year-end market value, Apple is “a different kind of holding company” for Berkshire Hathaway, at least in terms of its so-called “four giants” which make up a large part of the value of the company. Apple ranks second in size, behind a “group of insurers” of which Berkshire “effectively owns 100%” on its books.
Unlike the insurer cluster, Berkshire ownership is “just 5.55%”, which is up slightly from 5.39% a year ago. Buffett points out that while “this increase looks like small potatoes,” shareholders should consider that “every 0.1% of Apple’s earnings in 2021 amounted to $100 million.”
This increase was also natural for Berkshire, as it did not have to spend any funds to obtain this increased stake. “The Apple takeovers did the job.”
In accounting for Apple in its holdings, Buffett adds that “only Apple dividends are counted in Berkshire’s GAAP earnings reports.” Last year, Apple paid Berkshire about $785 million in dividends, while its “share” of Apple’s earnings was $5.6 billion.
Much of the profits were used in share buybacks, “an act we applaud” according to the famous investor.
The letter takes a moment to credit Tim Cook as the “brilliant CEO” at the helm of Apple. Cook “rightly considers users of Apple products his first love, but all of his other constituencies also benefit from Tim’s managerial touch,” Buffett writes.
Buffett previously called Cook a “fantastic manager” at Apple and “one of the best managers in the world.”
Apple appears in a second part of the letter, referring to investments made in other companies. Apple is among the 15 largest investments held by Berkshire, with the investment firm’s total equity investments in the market amounting to $350.7 billion.
For Apple specifically, 907 million shares have cost Berkshire about $31 billion to acquire over time, but have a market value of $161.2 billion. Indeed, Apple represents more than 45% of the total value of the company’s equity investment.