Warren Buffett’s Berkshire Hathaway Inc. disclosed a stake in Apple, betting that the technology company will rebound after a slump driven by a slowdown in iPhone sales.
Berkshire held 9.81 million Apple shares as of March 31, according to a regulatory filing Monday from the billionaire’s Omaha, Nebraska-based company. The holding was valued at $1.07 billion at the end of the first quarter.
Apple last month reported its first quarterly drop in revenue in 13 years, stoking concerns that the company’s best days have passed.
The company’s share slide since the middle of last year may have created an opportunity for Berkshire, even though Buffett typically avoids investments in technology companies.
“Apple at the current valuation makes a ton of sense; it’s a consumer-product company more than a tech company,” Jeff Matthews, an investor and author of Berkshire-related books, said about the new holding.
“The company has a great financial model, a great brand name and a cheap stock.”
Apple rose 1.8 per cent to $92.19 in early trading at 8.18 am. in New York after Berkshire disclosed its investment. The Cupertino, California-based company had slumped 14 per cent this year through Friday. Kristin Huguet, a spokeswoman for Apple, wasn’t immediately available to comment.
Chief Executive Officer Tim Cook is pivoting toward services and exploring new technologies such as self-driving cars to reduce reliance on the iPhone. Cyrus Mewawalla, managing director at London-based CM Research, said those initiatives are unlikely to pay off this year, but may reward more patient investors.
“What would make this stock a good buy is a whole load of projects we know they’re working on,” he said. “They’re working on a TV, a car, a whole bunch of apps coming for the Apple Watch. We know mobile payments has just started off.”
The investment could have been made by one of Buffett’s deputies, Todd Combs or Ted Weschler. Both have been building their own portfolios in recent years and typically take stakes of $1 billion or less per company, while Buffett makes larger wagers. The filing doesn’t specify the person behind each holding.
Berkshire has waded more into technology investments in recent years. Combs previously invested in Intel Corp. In 2011, Buffett amassed a multi-billion dollar holding in International Business Machines. He increased that stake slightly in the first quarter.
Berkshire also added to its holdings of Visa, Deere & Co. and Bank of New York Mellon, according to Monday’s filing. Buffett’s company exited a stake in AT&T and reduced its investment in Wal-Mart Stores.
© 2016 Bloomberg L.P
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