What Warren Buffett’s Grandpa Taught Him: Apple Inc. (AAPL), Google Inc (GOOG)

Published on March 8, 2013 at 11:09 am by The Motley Fool in Hedge Funds

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Apple’s not the only hoarder

Google Inc (NASDAQ:GOOG) also has a large cash hoard of $40 billion and offers no yield yet has crossed $800 in share price. Its P/E and PEGs are more than twice as high as Apple Inc. (NASDAQ:AAPL)’s at 25.3 and 1.28, respectively.

Google Inc (NASDAQ:GOOG) is up over 31% over the last year while Apple Inc. (NASDAQ:AAPL) is down almost 38% since its high of $705 last fall. Has the world gone mad? Sure, it was overbought but if it goes to $350 I can’t believe people won’t come back especially if they raise the dividend.

As for Berkshire Hathaway it hit a 52-week high on Feb. 28 after reporting a 49% gain for Q4. Buffett called the performance “subpar” as he called most of those paper gains but the ever-humble Buffett’s company grew net income to $4.55 billion from $3.05 billion in the year ago quarter. Berkshire-B is up 28.90% over the last 52 weeks.

Cash isn’t a dirty word

At what point does this cash issue go away? The bigger issue is new product for Apple Inc. (NASDAQ:AAPL) to keep up with a perceived Google superiority with Android and new products like Google Glass. Buy Google Inc (NASDAQ:GOOG) at your peril as the lemmings who’ve bought in on the Google Rush could hurt as much as those who bought into the Apple rush.

Buffett and Jobs, both great and visionary CEOs, undersood that cash is king. Those who held onto the Berkshire-A and Apple Inc. (NASDAQ:AAPL) long term made huge gains. Funny enough, in the letter that Ernest wrote he says,”I might mention that there has never been a Buffett who ever left a very large estate, but there has never been one that did not leave something. They never spent all they made, but always saved part of what they made, and it has all worked out pretty well.” I’d say so.