Warren Buffett is one of the most successful investors in history. His company, Berkshire Hathaway, has outperformed the S&P 500 index each year on average for more than 50 years by investing in stable so-called value stocks.
Buffett tends to avoid technology stocks because he prefers to invest in businesses he understands, particularly those producing strong profits and those returning money to shareholders. But it just so happens that one tech stock, Apple (AAPL -0.35%), ticks both those boxes in a big way.
Apple was founded in 1976, and it was first listed on a public stock exchange in 1980. However, Buffett's company didn't buy its first share in the company until 2016, when it was a mature, proven business. He has continued to buy the stock as recently as this year, and it now makes up almost half of Berkshire's $352 billion investment portfolio.
But investors who bet on Apple much earlier could have generated a staggering return compared to Buffett (on a percentage basis). Here's how a $1,000 bet on the company's initial public offering (IPO) in 1980 could have made you a millionaire.
Apple continues to focus on what it does best
Apple started producing personal computers for consumers in the 1970s, and it's still in that business today. But it has expanded its ecosystem to include the iPhone, iPad, Apple Watch, and a range of accessories to go with them. And it has developed an impressive portfolio of subscription services like Apple Music, Apple TV, and Apple News.
The company has never strayed from its mission to serve consumers, despite its key rival, Microsoft, expanding into business-to-business services like cloud computing. Apple's laser focus on what it does best appears to be working, because it's the world's largest company today with a valuation of more than $2.8 trillion, leaving Microsoft in second place.
Like any great company in operation for decades, Apple has faced challenges on its road to success. After a period of underperformance in 1985 (and with the company newly beholden to shareholders in the public markets), co-founder Steve Jobs was forced out. By the time he returned in 1997, reports suggested the company was just months away from bankruptcy.
Jobs's return was certainly a turning point. He oversaw the launch of several smash-hit products, starting with the iPod digital music player in 2001 and the first iPhone in 2007. While the iPod is no longer around, Apple has sold 2.3 billion iPhones globally since unveiling the product.
But the services segment is a focal point for investors today, because of its ability to operate with a high profit margin relative to the company's hardware products. The iPhone's success has enabled Apple to create new revenue streams through innovative features like iCloud digital storage and Apple Pay.
Apple's long-term growth has been spectacular
Apple's revenue trajectory has always pointed upward, despite some turbulent periods primarily caused by a challenging economy. We're in one of those periods right now, with elevated inflation and rising interest rates causing consumers to tighten their belts. As a result, Wall Street thinks the company's revenue will decline to $383 billion in 2023, compared to last year's $394 billion.
Ultimately, however, the company has come a long way since it listed publicly in 1980. It generated just $117 million in revenue that year, so its projected 2023 result would mark an increase of 3,272 times over the past four decades (and change).
As the chart below shows, the start of the iPhone era in 2007 kicked off an incredible run of value creation.
Apple has also generated consistent profits along the way. In the 10 years between fiscal 2012 and fiscal 2022, the company has earned a whopping $632 billion.
And over that same period, it returned $554.3 billion to shareholders in stock buybacks, and $131 billion in dividend payments. As I noted at the top, these attributes are the reason Apple stock is such a huge Warren Buffett favorite.
Here's how much $1,000 invested in Apple's IPO is worth today
Apple stock has gained more than 600% since 2016, when Buffett's Berkshire Hathaway first invested. But let's explore how much you would have made if you bought $1,000 worth of Apple stock at the time of its IPO on Dec. 12, 1980.
It went for $22 per share, which means your $1,000 investment would have bought about 45 shares. Given the company's incredible growth, the company has since authorized seven stock splits to reduce its share price and ensure it remains accessible to smaller investors. Therefore, today you would be holding 10,080 shares with a cost basis of $0.10 per share.
Apple stock now trades at about $187, so you'd be sitting on a mind-boggling return of about 180,000%. In other words, your $1,000 investment in 1980 would now be worth about $1.8 million!
But it gets better, because Apple has often paid a dividend periodically, starting in 1987. Assuming you never sold a single share, you would have collected an additional $162,288 in dividend payments to date! You would still be receiving $9,676 in dividends each year, more than nine times your original $1,000 investment. Who said long-term investing can't be exciting?
Whether you own Apple stock or not, it's never too late to pick up a few shares. In fact, considering the stock trades for about 5% below its all-time high, this still is an opportunity to buy in at a discount.
