In the following video, Fool senior technology analyst Eric Bleeker looks at a question that could seem ludicrous given Berkshire Hathaway's traditional aversion to technology: Would Warren Buffett ever buy Apple?
In spite of Buffett's long stance that technology is either too complicated or lacks the right long-term competitive advantages for his investing style, recent evidence points to his having more interest in the space than he lets on.
For example, Berkshire took a position in Intel (NASDAQ:INTC) back in 2011. The deal was small enough that it was almost assuredly from potential Buffett successor Todd Combs. Also, in a surprising move that eschewed its traditional long-term focus, Berkshire sold the position within a year's time for healthy gains. Yet the fact that Berkshire would invest in something that competes on the most cutting edge of technology -- the non-stop march of semiconductor technologies -- was intriguing.
Much larger than Intel was Buffett's buy of IBM (NYSE:IBM). It's a company that's as blue-chip as they come in technology and has a tremendous model that increasingly layers software and services on top its hardware portfolio, yet there's no denying it competes in some very fast-moving and advanced markets. IBM isn't a small bet, either. It's Buffett's third largest public holding. The $14 billion Berkshire owns in IBM is only slightly smaller than its fabled Coca-Cola holding.
Finally we come to Buffett and right-hand man Charlie Munger's description of Google (NASDAQ:GOOGL) back in March 2009:
"Google has a huge new moat. In fact I've probably never seen such a wide moat," said Munger. "I don't know how to take [the moat] away from them," said Buffett." "Their moat is filled with sharks!" Munger added.
Google does have a fabulous competitive position, yet even with Buffett's willingness to invest in great companies at fair prices, its current P/E of 26 is probably a bit too steep to see the Oracle sniffing around Google's shares.
So we have ample evidence that Buffett could very well be overly modest and cagey in his deference to technology investing. With Apple now within a modest one-day drop away from being in the 5% cheapest companies in the S&P 500, could Apple possibly be a stock on Buffett's radar?
As Eric notes, it has some qualities Buffett likes. Its $137 billion in cash is beyond a fortress-like balance sheet, the company has a tremendous global brand, and its cash flow continues to outpace earnings growth. Buffett's statements on CNBC last week also showed he doesn't find the company terribly expensive, suggesting Tim Cook use the company's cash to rebuy shares.
In the end, the biggest strike against Apple would be the perception that it's a hardware play prone to being dragged down by competitive forces in the coming years. Were Buffett to take any interest in even putting the sights of his elephant gun on Apple's shares, it'd probably have to come with his believing that mobile operating systems provide a larger user lock-in than many of his value peers would believe.
As Eric notes, seeing Berkshire buy Apple might seem laughable to those who know of Buffett's long lack of a track record in tech. Yet 10 years ago, Buffett's purchase of IBM shares might have seemed laughable today as well. To see Eric's full thoughts, watch the following video.
Eric Bleeker, CFA, has no position in any stocks mentioned. The Motley Fool recommends Apple, Berkshire Hathaway, Coca-Cola, Google, and Intel and owns shares of Apple, Berkshire Hathaway, Google, Intel, and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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