What Is Strange About Buffett’s Apple Investment
If you look at Warren Buffett’s portfolio, you will see it is filled with high quality businesses with long histories of success.
These are businesses that have proven they can grow and prosper over the long-run. The founding date of his top 5 holdings (which make up 69% of his total portfolio) are discussed below:
Kraft Heinz Co (NASDAQ:KHC): The company was recently created through a merger. Kraft traces its history back to the late 1800’s and early 1900’s:
– L. Kraft started his cheese business in 1903
– W. Post started Postum Cereal in 1895
– Oscar Meyer started his meat business in 1883
H.J. Heinz Company was founded in 1869 by its namesake, Henry John Heinz.
Wells Fargo & Co (NYSE:WFC): Henry Wells & William Fargo founded Wells Fargo in 1852.
The Coca-Cola Co (NYSE:KO): The first Coca-Cola was created in 1886 by Dr. John Pemberton in Atlanta, Georgia.
International Business Machines (IBM): IBM traces its roots back to 1911. It began life by the less grandiose name Computer-Tabulating-Recording-Company.
American Express Company (NYSE:AXP): American Express is the oldest of the 5, tracing its history all the way back to 1850.
The average founding year of Buffett’s top 5 holdings is 1876 – the same year the first telephone call was made.
Looking at these holdings, it is clear Warren Buffett looks for a very long history of sustained success. This is where Apple does not fit the traditional Buffett stock.
Apple was founded in 1976. The company does not have a sustained history of success. In 1997, Apple was bailed out of bankruptcy by a $150 million investment from Microsoft Corporation (NASDAQ:MSFT).
Apple did not become the Apple we know today until 2001, when the first iPod was released. The iPod’s success launched the iPhone, iPad, iTunes, and Apple Watch.
Today, Apple Inc. (NASDAQ:AAPL) is the largest corporation in the world based on both market cap and earnings:
– $518 billion market cap
– $50.7 billion (!) in earnings over the last 12 months
But Apple’s success is recent and came quickly. It does not match the slow gradual growth of Buffett’s other large holdings.
This makes me think that the Apple investment is a large bet (relative to the size of the portfolio they control) by either Todd Combs or Ted Weschler.
Apple Is A High Quality Shareholder Friendly Business
I look for high quality dividend growth stocks suitable for long-term holding. There’s no doubt Apple is a high quality dividend growth stock today.
Apple reinstated its dividend in 2012 (the company hadn’t paid a dividend since 1995). The company’s dividend history is shown below:
Notes: 2012 dividend is annualized, 2016 dividend is annualized
