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Apple is Berkshire Hathaway’s second of “Four Giants” defining the investment firm’s value, Warren Buffett has outlined, with the iPhone maker only behind a “cluster of insurers” in importance.
Warren Buffett is closely affiliated with Berkshire Hathaway’s ownership of part of Apple, and is a great admirer of the tech giant. In an annual letter to Berkshire shareholders, Buffett again praises Apple, as well as CEO Tim Cook.
The letter is an annual offering from Buffett and Berkshire Hathaway, and has repeatedly heaped adoration on Apple.
Described as “our runner-up Giant” by Buffett, as measured by its year-end market value, Apple is “a different sort of holding” for Berkshire Hathaway, at least in terms of its so-called “Four Giants” that make up a large chunk of the firm’s value. Apple lies second in importance, behind a “cluster of insurers” that Berkshire “effectively owns 100% of” in its books.
Unlike the insurers cluster, Berkshire’s ownership is “a mere 5.55%,” which is up slightly from 5.39% one year ago. Buffett points out that while “that increase sounds like small potatoes,” shareholders must consider that “each 0.1% of Apple’s 2021 earnings amounted to $100 million.”
That increase was also natural to Berkshire, as it didn’t have to spend any funds to gain that increase in shareholding. “Apple’s repurchases did the job.”
In accounting for Apple in its holdings, Buffett adds that “only dividends from Apple are counted in the GAAP earnings Berkshire reports.” Last year, Apple paid Berkshire approximately $785 million in dividends, while its “share” of Apple’s earnings amounted to $5.6 billion.
A lot of the earnings was used in share repurchases, “an act we applaud” according to the famed investor.
The letter takes a moment to credit Tim Cook as a “brilliant CEO” heading up Apple. Cook “quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well,” Buffett writes.
Buffett has previously called Cook a “fantastic manager” of Apple, and “one of the best managers in the world.”
Apple appears in a second part of the letter, referring to investments made in other companies. Apple sits among the top 15 largest investments held by Berkshire, with the investment firm’s total equity of investments carried at market worth $350.7 billion.
For Apple specifically, 907 million shares cost Berkshire approximately $31 billion to acquire over time, but has a market value of $161.2 billion. In effect, Apple makes up over 45% of the total equity investment value for the company.