REUTERS/Jim Young
- Warren Buffett's Apple bet has ballooned in value to nearly $180 billion.
- Apple stock has jumped almost 50% this year, as AI buzz has fueled a Big Tech rally.
- Berkshire Hathaway is now 15% undervalued, partly due to its Apple gains, one analyst says.
Warren Buffett's slice of Apple is looking juicier than ever, following a nearly 50% surge in the technology titan's stock price this year.
Buffett's Berkshire Hathaway owns about 916 million shares, giving it a 5.8% stake in Apple worth almost $180 billion today. The famed investor's conglomerate purchased the vast majority of those shares for $31 billion, meaning it's scored a nearly six-fold profit on paper (assuming it didn't pare the position last quarter.)
Apple stock has rallied to record highs this year alongside other Big Tech stocks, partly due to investor excitement about artificial intelligence (AI), which promises to boost productivity and bolster providers' profits.
Broader stock-market sentiment has improved too, as inflation has slowed from over 9% to 3% over the last 12 months. Slowing price growth has stoked hopes that the Federal Reserve will cut interest rates soon, lifting asset prices and stimulating the economy enough to avoid a recession.
Apple is by far the most-valuable holding in Berkshire's stock portfolio, and Buffett's company is Apple's biggest single shareholder. Indeed, UBS analyst Brian Meredith estimated in a research note this week that Berkshire's portfolio appreciated by 10.1% between April 1 and July 16 this year — and 75% of that gain was due to its Apple position.
Meredith suggested Berkshire's stock gains have raised its intrinsic value by 5%, meaning its shares now trade at a 15% discount to the company's underlying worth.
Of course, Buffett aims to invest in high-quality businesses for the long term, and cares little about short-term swings in stock prices. Yet he's defended the massive size of his Apple bet — it's worth nearly a quarter of Berkshire's $750 billion market capitalization — earlier this year, saying it's a "better business than any we own."
The Berkshire chief has also championed Apple's focus on doing a few things well, praised CEO Tim Cook as an exceptional leader, and underlined how indispensable products like iPhones and MacBooks are to their users.