Berkshire Hathaway, which has 5.7 per cent year-end ownership in Apple according to the former’s annual letter released recently, is its “third-largest business,” after insurance and railroad businesses, Chairman and CEO Warren Buffett told CNBC recently. “I don’t think of Apple as a stock. I think of it as our third business,” Buffett said. According to a December 31 filing last year with the US government, Berkshire had over 245 million Apple shares worth close to $72 billion as of late last year. Apple share price has climbed from $174.97 to $273.36 as on February 28, 2020, in the past 12 months while the company’s market cap stood at $1.20 trillion.
“It’s probably the best business I know in the world. And that is a bigger commitment that we have in any business except insurance and the railroad,” said Buffett as he wished he invested in Apple way back than he did. “I should have appreciated it earlier,” he said. The company (through one of Buffett’s lieutenants, said CNBC) had acquired the first 10 million shares of Apple in May 2016.
Berkshire Hathaway’s net earnings for 2019 stood at $81.4 billion on the back of unrealised gains from its stock investments vis-a-vis $4.02 billion in 2018, according to the earnings’ release. However, the operating profit fell to $23.9 billion in 2019 from $24.7 billion in 2018. Buffett said in the annual letter that the Berkshire Hathaway is 100 per cent prepared for his and his 96-year old partner Charlie Munger’s departure.
“Charlie and I long ago entered the urgent zone. That’s not exactly great news for us. But Berkshire shareholders need not worry: Your company is 100% prepared for our departure,” he said. In the letter, Buffet also shared his criteria for investment in new business. First, businesses must earn good returns on the net tangible capital required in their operation. Second, they must be run by “able and honest managers” and third, they must be available at “a sensible price.”