Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) latest 13F filing is out, and it reveals a number of the company's interesting trades, including selling most of its IBM stake, trimming its position in General Motors, buying more Apple (NASDAQ: AAPL), and starting a new position in Teva Pharmaceuticals, among other trades.
But it was Berkshire's huge purchase of tens of millions more Apple shares that was the most interesting trade by Berkshire chairman and CEO Warren Buffett. The famed investor had already sunk billions of dollars into the stock and has already made billions of dollars on the investment. Loading up on more Apple stock in the fourth quarter highlights just how bullish Buffett is on Apple's future.
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A no-joke bet on Apple
Buffett's purchase of Apple stock didn't represent just a slight boost. The billionaire's Berkshire purchased droves of Apple stock -- 31.2 million shares to be exact. This brought Berkshire's total stake in Apple to 165.3 million shares, worth just over $28 billion at the time of this writing. Further, it makes the stock Berkshire's largest holding, worth more than the company's stake in Wells Fargo, which is worth about $27.5 billion.
The enormous Apple stock purchase marked a steep acceleration compared to the rate Berkshire was loading up on Apple shares in the previous quarter. In Q3, Berkshire added just 3.9 million Apple shares to its portfolio.
Berkshire started buying Apple stock in early 2016, when shares were trading significantly lower. But Berkshire really got serious about buying Apple stock in the fourth quarter of 2016 and the first quarter of 2017, when shares were trading in a range between about $108 and $144 -- still well below Apple's stock price today of about $170.
Should you follow suit?
An analysis of Apple stock definitely makes it look like an attractive investment. Even with trailing-12-month revenue and earnings-per-share growth of 13% and 22% year over year, respectively, Apple trades with a price-to-earnings ratio of just 18. Further, Apple management expects strong growth to continue. In its first-quarter earnings release for fiscal year 2018, management guided for record second-quarter revenue between $60 billion and $62 billion. The middle of this guidance range would represent 15% year-over-year revenue growth -- an acceleration compared to Apple's 13% year-over-year revenue growth in Q1.
In addition, Apple's benefiting from significant momentum across multiple product segments. The tech giant's recent launch of its iPhone X helped drive double-digit revenue growth in the segment in Q1. And trailing-12-month revenue from services and other products is up 23% and 33% year over year, respectively. Even more, both segments are seeing accelerating growth when Apple's year-ago first quarter is adjusted to exclude its extra week in comparisons.
I'm certainly betting on Apple. Not only do I own shares, but I also called Apple stock my top stock to buy in 2018 and even added to my position earlier this year.
Of course, there are risks to the bull case. Apple's pricing power could erode as other tech giants ramp up their hardware efforts. Further, any headwind in Apple's iPhone business could significantly impair earnings since the product segment accounts for well over half of the tech giant's profits. But Buffett's huge incremental bet on Apple stock, even when he already owned tens of billions of dollars of the tech company, is certainly comforting.
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Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.