Almost half of BRK's portfolio in publicly traded companies is AAPL

[pcsrini]

According to this article, BRK owns $91B of AAPL which is 43% of its portfolio.

https://www.marketwatch.com/story/diver ... 2020-07-07

A provocative quote attributed to Buffett in the article:

Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”
The takeaway: Load up on what you know.

[Triple digit golfer]

But most of us regular investors don't know anything.

[aristotelian]

The rest of BRK must really be underperforming!

[Valueinvestor2]

According to this article, BRK owns $91B of AAPL which is 43% of its portfolio.

https://www.marketwatch.com/story/diver ... 2020-07-07

A provocative quote attributed to Buffett in the article:

Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”
The takeaway: Load up on what you know.

This is highly inaccurate. This headline refers to the publicly traded companies only. It does not include their wholly owned companies.

[Ferdinand2014]

According to this article, BRK owns $91B of AAPL which is 43% of its portfolio.

https://www.marketwatch.com/story/diver ... 2020-07-07

A provocative quote attributed to Buffett in the article:

Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”
The takeaway: Load up on what you know.

This is simply incorrect. BRK has 132 billion in cash alone.

[perfectuncertainty]

According to this article, BRK owns $91B of AAPL which is 43% of its portfolio.

https://www.marketwatch.com/story/diver ... 2020-07-07

A provocative quote attributed to Buffett in the article:

Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”
The takeaway: Load up on what you know.

This is highly inaccurate. This headline refers to the publicly traded companies only. It does not include their wholly owned companies.

+1

[pcsrini]

Thanks, all for clarifying the incorrect numbers in the article. It seems like the cash that BRK has on hand is 25% of the portfolio and AAPL is closer to 20%. Does this sound about right ?

[aristotelian]

Thanks, all for clarifying the incorrect numbers in the article. It seems like the cash that BRK has on hand is 25% of the portfolio and AAPL is closer to 20%. Does this sound about right ?

That does. They have $93B AAPL and market cap is a little under $500B.

[Valueinvestor2]

Thanks, all for clarifying the incorrect numbers in the article. It seems like the cash that BRK has on hand is 25% of the portfolio and AAPL is closer to 20%. Does this sound about right ?

Yes this is more accurate for sure. I think the railroad is valued at 20% alone.

[02nz]

And yet Warren Buffett only recently switched to an iPhone: https://www.cnbc.com/2020/02/24/apple-i ... phone.html

Apparently Tim Cooks flies to you to set up your iPhone in person if you own that much Apple stock!

[Robot Monster]

Berkshire's composition is like someone who has 29.66% bonds and 70.34% stocks, and of those stocks, 29.7% is AAPL.

$445B market cap
$132B cash
$313B company investments
$93B AAPL

[illumination]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I "guess" it's good they made such an outsized bet in one company that greatly outperformed? But isn't what attracts people to Berkshire is really conservative investing (not nearly half in one stock?) But I can't imagine how awful their returns would have been had they not invested in Apple.

[Longtermgrowth]

I wonder if Buffett knows that many prefer Android...

[TropikThunder]

At some point shouldn't this thread title be changed?

[Angst]

At some point shouldn't this thread title be changed?

I certainly agree.
So, is APPL's position in the hierarchy of equity capitalization in US equity market indexes "discounted" by this amount in BRK? I'm having trouble wrapping my brain around that. I think not, but should it?

[inbox788]

I wonder if Buffett knows that many prefer Android...

It doesn't matter. It's not about market share as much as profit share.

This one is a bit old. Need something more up do date:
https://www.forbes.com/sites/chuckjones ... ofit-pool/

Here's one from a year ago:
https://www.counterpointresearch.com/ap ... fit-share/

WB is all about earnings and cash flow and so long as AAPL delivers, he'll stick with it. That's why he abandoned the airlines, when he saw the earnings totally gone for the next few years, not to mention all those past ones and bankruptcies, which he probably remembers more than us.

[pcsrini]

At some point shouldn't this thread title be changed?

Yes, thanks I will update it.

[Robot Monster]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Betkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

[nisiprius]

Either you believe that Warren Buffett and his team have special skill and better judgement than the market, or you don't. If you buy BRK as a kind of general-purpose holding in lieu of a total market index fund, you do it because you want to take advantage of his skill. To the extent that he's just matching the market and BRK is just a kind of closet index fund, there's no point to it. You are buying BRK because it is different from the market. That means that you want to ride his judgement particularly where it looks wrong.

It's been said generally that, in business, if everyone think your idea is good, it is probably not a good idea.

It is most definitely not sufficient, but in order for BRK to beat the market, it is necessary that it do things that look like bad ideas. Sometimes it seems as if the general consensus is that Apple itself has a terrifyingly high weight in the market. If that's so, then overweighting Apple is both a legitimately contrarian idea, and even looks like it fits the silly sound-bite maxim of, in this case, being greedy when others are fearful.

Now I happen to be a total stock market guy so I am not disposed to idolize Warren Buffett, nor to overweight Apple, but as I say the only things that make sense to me are to buy BRK or not buy it. The idea of going with Buffett because you think he knows better than you, but then second-guessing Buffett on Apple because you think you know better than him, seems unsound.

Avoiding Apple because Buffett doesn't personally use an iPhone or "get it" is saying "my consumer expertise gives me the equivalent of insider information that the cold green-eyeshades crowd will never understand." A good way to sell the general public on stock-picking, but I (blush) no longer think it has any merit.

[atdharris]

What's odd is how poorly Berkshire has performed in relation to Apple's performance. It makes me wish I still did not hold a 6% allocation to it.

[illumination]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Betkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

And you could make the same case though for all sorts of individual stocks. Altria (MO) for example had a higher return than both Berkshire and the S&P 500, but does that mean cigarettes are a good bet moving forward?

If you had a decent amount in Berkshire in the early days, you're a gazillionaire, same with people that bought into NetFlix or Amazon in 2009.

I really don't think Buffett makes many decisions anymore anyway at Berkshire, but when he actually dies, I just think his name and "story" is a lot of what sells Berkshire stock. It would almost be like if Elon left Tesla.

[Robot Monster]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Berkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

And you could make the same case though for all sorts of individual stocks.

The difference is Berkshire isn't an individual stock, even if it includes a whopping amount of single stock Apple risk. People often point to the S&P's outperformance over international -- I'm just giving the S&P the same treatment using Berkshire. I don't buy into this line of thinking, personally; I'm an international investor.

[illumination]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Berkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

And you could make the same case though for all sorts of individual stocks.

The difference is Berkshire isn't an individual stock, even if it includes a whopping amount of single stock Apple risk. People often point to the S&P's outperformance over international -- I'm just giving the S&P the same treatment using Berkshire. I don't buy into this line of thinking, personally; I'm an international investor.

But it is technically an individual stock, BRK.A or BRK.B, I agree it's judged more like a actively managed mutual fund.

But people would make the case some individual stocks are a diversified conglomerate and not really one company, like General Electric would be in banking, aerospace, home appliances, healthcare, etc, so therefore it's safer than owning individual stock as it makes up so many different companies. Are they also like Berkshire?

However you want to score Berkshire, half being in one single stock, it just doesn't seem to me like to me they have much of a vision or plan (and I own Apple individually, I think they are a company that continues to outperform) Just a lot of poor decisions recently, huge cash hoard because they don't know what to do with it, and half in just one company. When Corona panic hit, that should have been where Buffett deployed that enormous cash hoard, instead he likely sold assets at the bottom.

If you got in early on this American success story, congrats. If I owned it in a retirement account, I would have sold a while ago. If I owned a large amount in taxable, I'd probably keep it for my heirs to get with a stepped up basis.

[Valuethinker]

Berkshire's composition is like someone who has 29.66% bonds and 70.34% stocks, and of those stocks, 29.7% is AAPL.

$445B market cap
$132B cash
$313B company investments
$93B AAPL

Without analysing the liability side of the balance sheet this is an incomplete picture.

BH is an insurance company and a conglomerate. The insurance assets are offset by the funding liabilities.

The company in vestments are reported at book cost as per US GAAp so undervalued.

It may be the have a huge capital gain on the Apple shares and hence the size of the stake. The same would be true on their geico shares.

[inbox788]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Betkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

I added DIA to compare. Didn't realize DJIA is outperforming SP500 during this period. Didn't easily find one that tracks before 1999. Anyway, BRK style/ tilt is more industrial than total market, and the graphs help illustrate that. [Strange that BRK took a dip Y2K without being heavily in Tech at the time; top holdings Amex, Coke, FreddieMac https://www.berkshirehathaway.com/2000ar/2000ar.pdf ]

https://www.portfoliovisualizer.com/bac ... ion3_3=100

And in the limited world (profitable dividend paying cash generating cash flow positive stocks) that Buffet invests in, AAPL may not be very overweight. If AAPL is about 5% of SP500 and you only invested in half the that are value stocks, then it would be 10%. And if you only invested in the half that was profitable (or more profitable), then it would be 20%. And as some folks have pointed out, the private companies are about half the value, so that bumps AAPL share to around 40%, and we're in the ballpark.

Either you believe that Warren Buffett and his team have special skill and better judgement than the market, or you don't. If you buy BRK as a kind of general-purpose holding in lieu of a total market index fund, you do it because you want to take advantage of his skill. To the extent that he's just matching the market and BRK is just a kind of closet index fund, there's no point to it. You are buying BRK because it is different from the market. That means that you want to ride his judgement particularly where it looks wrong.

Whatever you believe, one use of BRK is the no (explicit) dividend. If you're in a high tax bracket, equal performance means the dividend is deferred (kept inside BRK), and over decades, that's an advantage, if BRK isn't paying extra taxes on it. Where is the billions of Apple dividend to BRK going to and taxed? I've never figured out if it's truly tax efficient and beneficial or not. Heinz is another example where my BRK dividend and tax math doesn't add up. https://www.fool.com/investing/2019/11/ ... ft-he.aspx

Is there another similar alternative in a taxable account? I think of it as a closed end fund where all the dividends are reinvested and you collect it all at the end and pay capital gains tax. Imagine owning Apple for 20 years and not paying taxes on dividends along the way, but still reinvesting the full amount of the dividends, not just the after tax portion.

[randomguy]

I just can't see how anyone makes a strong case for "new money" to be invested in Berkshire.

I agree with you. Yet, if I was tasked with making a case for Berkshire, I'd merely show them its historical returns vs the S&P from Jan 1986 - Jun 2020.

$10K of Vanguard 500 Index Investor --> $305,254
$10K of Berkshire Hathaway Inc. --> $1,082,186

https://www.portfoliovisualizer.com/bac ... ion2_2=100

And you could make the same case though for all sorts of individual stocks.

The difference is Berkshire isn't an individual stock, even if it includes a whopping amount of single stock Apple risk. People often point to the S&P's outperformance over international -- I'm just giving the S&P the same treatment using Berkshire. I don't buy into this line of thinking, personally; I'm an international investor.

People made this argument about all sorts of conglomerate over the years. So far none of them keep outperforming forever. Owning BRK is making a concentrated bet on a small segment of the markets. Sometimes it pays off (1986-2004). Some times it doesn't (2004-2020). Your guess is as good as mine about the next 20 years.

[averagedude]

With Warren's money, we could care less about the stock portion of my portfolio. Both of us frugal folks could easily live off of his 10% in US treasuries.