Wednesday 4th January 2023
As of November 2022, Berkshire Hathaway owned 895m shares in Apple (APPL). This position was valued at $124bn, roughly 40% of the $296bn in marketable securities managed by Warren Buffett and his portfolio managers: Todd Combs and Ted Weschler.
Why does one of the greatest investors of all time have so much of his capital allocated to the stock right now?
According to Counterpoint Research, Apple shipped just 14% of all smartphones globally in the first nine months of 2022, but it accounted for 43% of all revenues and 82% of all profits – its highest profit share since 2015.
COVID in China may continue to disrupt supply of iPhones
Recent months have been chaotic for Apple, which in November said it was experiencing “significant” disruptions in the assembly of high-end iPhones, following an outbreak of Covid at a megafactory in Zhengzhou, which is run by Foxconn, its biggest assembler.
Concerns around the production of iPhones in China linger. As the country removes its zero-COVID restrictions we are being reminded why they had them in the first place. While 90% of Chinese nationals are said to have been vaccinated it masks the fact that the country’s homegrown vaccines are less effective than the mRNA ones used widely elsewhere. This could lead to a spike in COVID-related deaths in China this year.
Key area’s of dominance
App ecosystem – Apple iPhone users face great hurdles if they consider moving over to use a Samsung or Google phone: they risk losing all their photos stored in Apple’s cloud and usually have to learn new software functionality (what button do I press to go “back”?).
Purchasing power – Apple recently shifted suppliers for the manufacture of the iPhone Pro, from Taiwanese Foxconn to China’s Luxshare Precision. Apple’s large orders can make or break a supplier and therefore these suppliers usually have to bend to meet Apple’s demands.
The Equity Analyst 