Thanks to his unbelievable track record of allocating capital as the longtime CEO of Berkshire Hathaway, it's not a shock that Warren Buffett is one of the most closely watched investors out there. The average person can follow his moves to find potential stock ideas.

The conglomerate has dozens of holdings, but there's a single position that stands out. After purchasing shares of Apple (AAPL 1.36%) in the first quarter of 2016, this "Magnificent Seven Stock" now makes up 43% of Berkshire's $400 billion portfolio. That's thanks to a monster 730% rise in the share price since the start of 2016.

Investors can learn a lot by figuring out Buffett's thought process when he first made the decision to buy Apple stock.

Buffett's no-brainer investment

Buffett's investment philosophy is well publicized. This makes it fairly easy to understand the key factors that drew him to Apple nearly a decade ago. To sum it up, the Oracle of Omaha saw a great business trading at a cheap valuation multiple.

Apple possesses arguably the world's most valuable brand. It sells popular hardware products, most notably the iPhone, that consumers absolutely love and can't live without. Moreover, these devices have historically exhibited pricing power, a trait Buffett certainly appreciates.

Add this to compelling software and services offerings, and the business has created a powerful ecosystem that essentially locks users in. Buffett likely understood that this combination of hardware and software was not replicable, which is exactly what protects Apple's competitive standing.

What's noteworthy is that Apple was performing very well around the time Buffett first bought shares. This was (and still is) an extremely profitable enterprise with a stellar financial profile. In fiscal 2015, the business reported a 30% operating margin. At that time, it had $150 billion of net cash on the balance sheet. There was minimal financial risk.

That's why it's surprising to know that the stock traded at a dirt-cheap average price-to-earnings (P/E) ratio of just 10.6 during the first quarter of 2016. Perhaps the market was worried about the prospect of softer iPhone sales. Who knows? In typical fashion, Warren Buffett took advantage of what Mr. Market offered him at that time. And that move has benefited Berkshire tremendously.

Is it too late to buy Apple stock?

As of this writing, Apple trades 7% off its peak price, a milestone that was reached earlier in July. Investors appear to be taking a bit of a breather. But this is still a company with a market cap of nearly $3.4 trillion, which generated $382 billion in revenue in the past 12 months.

While it might be easy to follow blindly in Buffett's footsteps and immediately add this stock to your personal portfolio, I think it's best to be more critical. In fact, I'd argue that now is a terrible time to buy a stake in Apple.

One reason why I feel this way is due to slowing growth trends. The iPhone still drives a significant chunk of Apple's financial performance. As consumers don't feel the need to upgrade to the newest model as frequently, Apple can feel the pain. Revenue declined 2.8% in fiscal 2023. Over the next three years, sales are projected to rise by just 5% per year.

Those muted growth prospects might not be alarming if the stock traded at a cheap valuation. However, this is far from the case today. Shares go for a steep P/E multiple of 34. That prices in huge growth in the years ahead, which I don't think will come to fruition.

For now, investors should keep Apple on the watch list until a sizable drawdown happens.