2016-05-17

Buffett Invests $1B in $AAPL, Apple Invests $1B in China's Didi Chuxing

Why Warren Buffett Bought $1 Billion in Apple Stock
Unigestion Investment Director Federico Schiffrin weighs in on Berkshire Hathaway's stake in Apple. He speaks on Bloomberg ‹GO› May 16, 2016.

In a May 16, 2016, Form 13F filing with the SEC, Warren Buffett's Berkshire Hathaway--domain name: berkshirehathaway.com, stock symbols: BRK.A / BRK.B, market cap US$345B--disclosed its US$1B position in Apple --Principal domain: apple.com, stock exchange symbol: NASDAQ: AAPL, market cap US$515B--as of March 31, 2016.

Apple disclosed on May 12, 2016, it had invested US$1B in a Chinese Uber competitior (vehicles for hire) transportation network company Didi Chuxing, formerly Didi Kuaid, domain name: xiaojukeji.com, a privately-held company also backed by Tencent and Alibaba. Didi is valued (as of February 2016) at approximately US$20 billion

Why Apple Invested $1 Billion in Didi:

Apple is deepening its ties in China with a $1 billion investment in ride-hailing company Didi. Bloomberg's Tim Higgins examines the deal and what it could mean for Apple in China. He speaks on Bloomberg ‹GO›, May 13, 2016.

Warren Buffett’s Berkshire Hathaway Takes $1 Billion Position in Apple | WSJ.com comment:
"... Buffett doesn't know much about technology, but I'm sure he can see that smartphone penetration is nearing 90%.  'Hey Warren, buying Apple today is like buying MSFT, DELL & INTC (without the bubble premium) in 2000 when 90% of households had a PC.  There is not going to much growth in Apple, only financial engineering which has not work out so well for IBM since you bought it.'"
Berkshire Hathaway is betting on:
  1. the management (Tim Cook, Jony Ive, et al);  
  2. the stock valuation (see chart); 
  3. "the moat"--Apple products keeping 'happy captive consumers' 
  4. the stock buybacks
  5. the stock dividend
  6. Apple's cash (US$233B
  7. China is not a problem (unlike Carl Icahn)
It may work out. But Warren Buffett is not known for being an astute tech investor (see reference to IBM in the comment above). But he has a great overall track record. What's that? Oh yeah, "Past Performance Is No Guarantee of Future Results."

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