Buffett's Berkshire Takes $1 Billion Position in Apple -- 7th Update
17 May 2016 - 2:04AM
Dow Jones News
By Lauren Pollock and Anupreeta Das
Warren Buffett's Berkshire Hathaway Inc. took a new $1 billion
position in Apple Inc. in the first quarter, a move that comes as
the technology giant's shares have been battered amid a slowdown in
iPhone sales.
The legendary investor's firm reported owning 9.81 million
shares of Apple as of March 31, valued at roughly $1.07 billion.
But the value of that investment dropped significantly after Apple
reported its first quarterly revenue decline since 2003 last
month.
Mr. Buffett, who for years avoided technology stocks, previously
professed to not understand the sector and had argued that it is
difficult to defend its competitive advantages. Mr. Buffett's
record has been built on investments in insurers, financial
companies and industrial businesses, including household names like
Coca-Cola Co. and American Express Co.
Mr. Buffett told The Wall Street Journal in an email Monday that
the Apple investment was made by one of his stockpicking
lieutenants. In recent years, he added two former hedge-fund
managers, Todd Combs and Ted Weschler, to Berkshire's investing
team. They have shown a willingness to wade into corners of the
market that Mr. Buffett himself won't touch, including the tech
sector.
Berkshire's first big jump into the tech space came in 2011 when
the firm reported a position valued at more than $10 billion in
International Business Machines Corp. Berkshire increased that
stake slightly in the first quarter.
The firm is also said to be backing a consortium that includes
Quicken Loans Inc. founder Dan Gilbert that is vying for Yahoo
Inc.'s Internet assets, according to Reuters and other media
outlets. Such a move would mark another investment in an older tech
name.
In Apple, Berkshire likely saw a buying opportunity, as the
shares are off sharply from last summer's highs as the company
struggles to maintain the sales surge that followed the
introduction of its larger-screen smartphones in late 2014. The
2015 successors to those initial big-display models haven't
garnered as much enthusiasm from consumers.
Apple traded above $130 a share last July and ended the first
quarter at $108.99 before continuing to fall. The stock got a
bounce in morning trading on Berkshire's investment, rising 1.8% to
$92.10. The company's market value is about $510 billion, according
to FactSet.
Berkshire's positions were disclosed in a 13F filing with the
Securities and Exchange Commission, a quarterly requirement for
investors managing more than $100 million. The report indicates the
number of shares held and the value of each stake at the end of the
quarter, so it isn't clear if Mr. Buffett's firm has continued
buying the stock since the quarter ended.
Leon Cooperman's Omega Advisors Inc. also got back into Apple
during the quarter, according to a filing, taking a small $25
million position more than a year after selling a bigger stake.
Berkshire's investment in Apple -- the firm's only new position
taken in the quarter -- follows the exits of other well-known
investors, Carl Icahn and David Tepper. Mr. Icahn said last month
that he had sold his big stake, telling CNBC at the time that Apple
is a great company but no longer a "no-brainer" as an investment
choice. Mr. Icahn made his initial investment, reported to be worth
about $1.5 billion, in 2013. He subsequently bought more shares and
called for the company to boost its stock buybacks. Mr. Tepper's
Appaloosa Management LP disclosed his sale in a 13F filing on
Friday.
As for IBM, Berkshire bought 198,853 shares in the first
quarter, bringing the total value of its position to $12.3 billion.
IBM is one of Berkshire's biggest four investments, along with
Kraft Heinz Co., Wells Fargo & Co. and Coca-Cola Co. Those
three positions were unchanged in the first quarter.
Berkshire, meanwhile, continued to bet on Phillips 66,
increasing the size of its investment by 23% to $6.5 billion. The
firm eliminated its position in AT&T Inc., which it had pared
in the previous quarter as well. Mr. Buffett had been a large
investor in DirecTV, which AT&T bought last July.
The firm also exchanged most of its $4.2 billion position in
Procter & Gamble Co. in the quarter to buy battery maker
Duracell. That deal, which was originally unveiled in late 2014,
involved swapping stockholdings for a business that can generate
cash and expand Berkshire's earnings base without paying hefty
taxes. The firm's remaining position in the maker of Gillette
razors and Pamper diapers was about $26 million at March 31.
Write to Lauren Pollock at lauren.pollock@wsj.com
(END) Dow Jones Newswires
May 16, 2016 11:49 ET (15:49 GMT)
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