Warren Buffett's Greatest Investment Ever

It shouldn't come as a great surprise that the biggest investment in Berkshire Hathaway (BRK.A 1.00%) (BRK.B 0.79%) history is Apple (AAPL -0.69%). In this episode of "The Rank" on Motley Fool Live, recorded on Feb. 28, Fool.com contributors Jason Hall, John Bromels, and Travis Hoium discuss why the tech behemoth could also be considered Warren Buffett's greatest investment, too.

Jason Hall: Apple makes up an enormous share of the company. For me the reason I picked, I think this would be good we can start pivoting and work backwards through our list and talk about why we picked them and why we think there's so emblematic. For me, the reason I actually rated this No. 1 and neither of you rated it No. 1, you both rated it No. 2, is I think that there are so many things about it that are just so reflective of Warren Buffett. Like No. 1, he loves really strong consumer brands. I think for Buffett, that might be his biggest competitive advantage in terms of if he were to go rank competitive advantages because so you think about that, having a vast, super valuable brands. You think about Coca-Cola, American Express, there's a lot of the same thing there, and then you have Apple. This is one of the most powerful consumer brands on earth. Then the next, I think, things that he likes to see is you have really strong economic mode. High cost of entries, you think about the railway, you think about the utility business. Those aren't brand-driven businesses, but it costs so much money for somebody to get into compete against you. When you have a powerful brand like Apple, that's it. That's huge. The other thing is it is an enormous cash flow business. We know that his success is finding businesses that are really good at generating cash flow. He's just been so good at finding those businesses, and when there's been failures, it's not because the business wasn't able to generate cash flow, it's because something else happened that undermined the thesis. To me, this is the biggest one here. This is the biggest one for me with Apple, and why I think it's so representative of Warren Buffett is he doesn't have rules, he has guidelines and he will change his mind. He will absolutely change mine. Back in the 2000s, he never said tech stocks are terrible, technology is never going to win. He never said that. He said, I don't understand this stuff. I don't know how to value it, so I stick with the things that I can value. At some point in the next 15 years, he began to understand Apple and figured out how to value it and decided, obviously, this is a massive investment opportunity, a great place for me to pay a fair price for a wonderful business.

Travis Hoium: I think it's interesting that he picked Apple of all these companies because if you think about, take the FANG stocks as an example, Apple is the one that does hardware. I think that's telling, from a Buffett perspective, he's friends with Bill Gates. But I don't believe ever had a position or a sizable position in Microsoft.

Hall: Yeah, I don't think so.

Hoium: Didn't buy [Alphabet's] Google, he has talked about how he basically missed Google, basically didn't understand that business. That's understandable. It's not in his wheelhouse. Apple fits on both of those two things. It fits the, hey, we're a technology company, but we make hardware, which, like you're saying, there's a moat to making hardware. It is really hard to make hardware. We've seen Amazon fail, we've seen [Meta Platforms'] Facebook fail trying to get into hardware. It fits his skill set while still having this tech stock growth curve. I think that's an interesting that was the specific company because it is very Buffett-esque while also being high profile in tech.

Hall: John.

John Bromels: Yeah. What Travis just said, it does make sense that he would go with Apple in terms of tech. Then what you said to Jason, the brand is there. It is manufacturers making something, a consumer product. At the time of his purchases, Apple was essentially a bet on those products and that brand. It was not about, we think Apple is going to get into all of these other things that we have said, oh maybe Apple will get into this, get into that. It was just really about the phones. It is not a metaverse place.

Hall: People will keep an eye on iPhones and the unit economics are going to continue to be incredible. I'm going to share one chart here. This is for Moody's and Apple both. Because I think this is another thing that I think we're all old enough to remember when Buffett issued buybacks. He never really did. He said it was more along the lines of --

Bromels: They're better places for the money.

Hall: Right. You're not paying me to buy Berkshire, you're paying me to allocate to grow the size of our operating company. But that's another reason that Apple and Moody's have been so successful. This is from the high share account. Both of these companies have a long history of taking their cash flows and repurchasing shares. I think that's a really powerful thing. In the annual letter, Buffett actually talked about that. How their stake in Apple increased from 5.1 percent to 5.3 percent over the past year and they didn't buy a single share, was Apple repurchasing shares and increasing their stake in the company. I think that's pretty cool.