Warren Buffett, President and CEO of Berkshire Hathaway Inc.
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Warren Buffett said he now sees tech giant Apple as one of the four pillars driving Berkshire Hathaway, a conglomerate of mostly old-economy businesses that have grown over the past five decades.
In its annual letter to shareholders released on Saturday, the 91-year-old investment giant listed Apple under the headline “Our Four Giants” and even called the company the second most important after Berkshire’s group of insurers, Thanks to its chief executive.
“Tim Cook, Apple’s illustrious CEO, regards users of Apple products as his first love, but all of his other constituencies also benefit from Tim’s managerial touch,” the letter said.
The “Oracle of Omaha” clarified that it’s a fan of Cook’s stock repurchase strategy, and how it gives increased ownership of each dollar group of the iPhone maker’s earnings without the investor lifting a finger.
“Apple — our runner-up giant, as measured by its annual market value — is a different kind of holding. Here, we own only 5.55%, up from 5.39% a year ago,” Buffett said in the letter. “This growth sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings were $100 million. We didn’t spend any Berkshire funds to achieve our accretion. Apple’s repurchases worked.”
Berkshire began buying Apple stock in 2016 under the influence of Buffett’s investment representatives Todd Combs and Ted Weschler. By mid-2018, the group had acquired 5% ownership of the iPhone maker, a stake valued at $36 billion. Today, the Apple investment is now worth more than $160 billion, accounting for 40% of Berkshire’s equity portfolio.
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“It’s important to understand that the GAAP earnings Berkshire report only calculates dividends from Apple — and last year, Apple paid us $785 million of them. Yet our ‘part’ of Apple’s earnings is $5.6 billion.” The dollar was. Much of the company retained was used to repurchase Apple shares, an act we appreciate,” Buffett said.
Outside of index and exchange-traded fund providers, Berkshire is Apple’s largest shareholder. The group has enjoyed regular dividends from the tech giant over the years, averaging $775 million annually.
railroads and energy
Buffett credits his railroad business BNSF and energy segment BHE as two other giants in the group, which both posted record earnings in 2021.
“BNSF, our third giant, remains the number one artery of American commerce, making it an essential asset to America as well as Berkshire,” Buffett said. “BHE has become a utility powerhouse and a leading force in wind, solar and transmission across the United States.”
Berkshire’s operating income rose 45% in the fourth quarter, thanks to the continued rebound from the pandemic’s hit in its railroad, utilities and energy businesses.
Buffett bought a record $27 billion worth of Berkshire shares back in 2021 as investors continued to prioritize internal opportunities in an increasingly expensive market. At the end of last year, Berkshire had record cash of about $146.7 billion.