Those looking to forge a successful path in investing could do worse than mirroring the strategy of legendary Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%) CEO Warren Buffett, arguably one of the greatest investors of all time. Since taking charge of the company back in 1965, his stock picks have yielded compound annual gains of roughly 20% and have collectively soared a staggering 3,787,464%.
The Oracle of Omaha has more than three dozen stocks in Berkshire's equity portfolio, giving investors plenty to choose from. There's arguably something for every investing taste among Berkshire's most prominent stock holdings.
So, if I could only buy just one Warren Buffett stock right now, my pick would a company with a strong history of growth and a track record of returning capital to shareholders. That's why Apple (AAPL 0.52%) would be my top pick.
Image source: The Motley Fool.
Woodstock for capitalists
This past weekend, Berkshire Hathaway held its 2023 annual shareholder meeting and it was clear that the love affair between Buffett and Apple continues, as he continued to heap praise on the company.
Referring to Berkshire's ownership of Apple, which amounts to nearly 6% of the company, Buffett said (emphasis added), "Our criteria for Apple was different than the other businesses we own -- it just happens to be [a] better business than any we own."
He went on to cite the enduring demand for the iPhone as one of the key differentiators:
Apple has a position with consumers where they're paying 1,500 bucks or whatever it may be for a phone. And the same people pay $35,000 for having a second car, and [if] they had to give up a second car or give up their iPhone, they give up their second car. I mean, it's an extraordinary product.
Buffett admitted to selling some shares a few years ago, and his thoughts on that today.
"I made a mistake a couple of years ago and I sold some shares," he said. "I had certain reasons why gains were useful that year from a tax standpoint, but having heard me say that, it was a dumb decision."
It's clear from Buffett's comments that he still believes Apple -- and the iPhone -- are best-in-breed.
Remarkable resilience
Given the current environment of decades-high inflation and rising interest rates, consumer budgets are stretched to their breaking point. Considering those challenges and the uncertainty that remains, it would be easy for investors to conclude iPhone sales would be hit hard, yet that simply wasn't the case.
Even in the face of the ongoing economic headwinds, the resilience of Apple's flagship device was clear. For its fiscal 2023 second quarter (ended April 1), iPhone revenue of $51 billion grew 1.5% year over year, setting a March-quarter record. Services also played its part: Sales of $21 billion climbed 5%, reaching a new all-time high. This helped keep Apple's overall decline to a minimum, with revenue of $94.8 billion dipping just 3% year over year, while its earnings per share of $1.52 were unchanged.
Shareholders benefit
Over time, Apple's consistent strong performance has helped it rise to the top of the heap, becoming the world's largest company, with a market cap of $2.74 trillion. That has translated into share-price gains of 959% over the past decade. But that's just the beginning.
Since Apple resumed paying a dividend in 2012, it has amassed quite a track record. In fact, the company recently announced its 11th consecutive annual increase, with the payout climbing 4% to $0.24.
On a split-adjusted basis, Apple's payout initially began at $0.095, but has soared an impressive 153% since inception (including this most recent increase). Furthermore, the tech titan uses just 16% of its profits to fund the payout, so the company has the resources to continue to raise its dividend for the foreseeable future.
To be clear, the yield might seem paltry at 0.55%, but that's the result of its enormous share-price growth. Combining the dividend and stock appreciation has rewarded Apple shareholders with gains of more than 1,130% over the past 10 years.
Apple has gone even further, with a generous share repurchase plan that it just increased by $90 billion. The company has been buying stock hand over fist, retiring nearly 39% of its outstanding shares since 2013. This gives shareholders a larger slice of its profits.
Buffett has previously commented on Apple's share repurchases, saying he's "wildly in favor of it." He is also a fan of the fact that it increases Berkshire's ownership of every dollar of Apple's profits, without Buffett having to lift a finger.
Every rose has its thorns
Even with the Warren Buffett seal of approval, Apple stock won't appeal to every investor. Some would rightfully argue that with a potential recession on the horizon, demand for the iPhone could wither, and the company's overall sales could falter, potentially denting the stock in the process.
Furthermore, Apple shares aren't especially cheap, selling for 29 times earnings, a bit higher than the price-to-earnings ratio of 25 for the S&P 500. However the S&P's total returns pale in comparison to Apple, up just 208% over the past decade.
That said, given the company's aforementioned history of robust growth and impressive record of shareholder returns, Apple is the one Warren Buffett stock I would buy if I could only buy one.
