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Warren Buffett Just Bought More Apple Stock -- Here's the Key Lesson to Learn

By Matthew Frankel, CFP® - Updated May 4, 2018 at 1:45PM

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Berkshire Hathaway's Apple stake is now worth more than $40 billion, and you need to hear what Warren Buffett just said about it.

Warren Buffett told CNBC that Berkshire Hathaway's (BRK.A 3.75%) (BRK.B 4.02%) stake in Apple (AAPL 2.45%) became even more massive during the first quarter. Specifically, Berkshire added about 75 million shares of the iPhone maker, bringing the company's total stake to over 240 million shares, worth approximately $43 billion as of this writing. This easily makes Apple the largest position in Berkshire's stock portfolio, according to the latest available information.

When asked about Apple's recent quarterly results, which were significantly better than analysts' expectations, Buffett shared an excellent piece of investing wisdom that all stock investors need to hear.

Warren Buffett speaking to the media.

Image Source: The Motley Fool.

Don't buy a farm because you think rain is coming

In response to the question about Apple's first quarter, Buffett didn't seem terribly excited about the company's sales. In fact, Buffett said that anyone who focuses on iPhone sales in a single quarter "totally misses the point" of investing in the stock.

"Nobody buys a farm based on whether they think it's going to rain next year," Buffett said. "They buy it because they think it's a good investment over 10 or 20 years."

This instantly became one of my all-time favorite Buffett quotes, and sums up how investors should approach prospective stocks. Instead of buying a stock because of how the company is doing now, buy stocks that you think will have great businesses for decades to come.

What this means to you as an investor

This piece of advice is even more appropriate since it was said during the middle of earnings season, when investors often make the mistake of focusing on a company's top-line and bottom-line numbers for a single quarter.

To be clear, I'm not saying that you shouldn't pay attention to earnings reports -- quite the opposite, actually. However, it's important to focus on the right things, such as long-term growth trends, responsible management decisions, and the general reasons why a company beat or missed expectations.

For example, if a company's earnings missed estimates because management decided to invest more capital in future growth opportunities, it's not necessarily a bad thing. If a company missed sales goals in a single quarter, but the business is otherwise healthy, it's not the worst thing in the world. Conversely, if a company surpassed earnings because of a better-than-expected benefit from tax reform, it doesn't necessarily mean that the business is doing well.

The point is: It's important to evaluate a long-term stock investment for what it is -- a piece of a business. Would you sell your own business based on how well one product sold over three months, or by whether profits missed or exceeded your expectations by a small margin? Of course not. The same logic applies here.

Don't copy the experts, but learn from them

As a final thought, it's worth pointing out that I'm not suggesting you buy Apple stock just because Warren Buffett did. In fact, I never suggest buying or selling any investment just because a billionaire did -- even if that billionaire is the Oracle of Omaha himself.

Instead, the real reason to follow what billionaires are buying and selling is to learn valuable investing lessons like this one. Don't get me wrong, Apple is a great company. However, the lesson -- that it's important to think years into the future and not just about companies' top- and bottom-line numbers -- is one that can serve you well throughout your investing career.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$141.66 (2.45%) $3.39
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
$417,401.43 (3.75%) $15,101.43
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
$278.28 (4.02%) $10.76

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