Shares of Apple Inc. AAPL rose 1.23% in yesterday’s trading session after a regulatory filing revealed that Warren Buffett is betting big on the tech giant. Buffett’s Berkshire Hathaway BRK.B has increased its stake by 55% in Apple.
This news is a positive for investors as people are familiar with Warren Buffett’s style of long-term and value investment. Berkshire Hathaway now holds 15.2 million of Apple shares, up from 9.8 million shares held earlier.
Berkshire Hathaway’s stake in Apple was initially revealed in May 2016 when it disclosed that it had bought 9.81 million shares of Apple worth over $900 million then. Notably, Apple was going through tough times then with its shares plummeting. Since then, there has been some recovery after the company reported better-than expected third-quarter fiscal 2016 results. However, concerns regarding the scope for growth remain.
In fact, investors like David Einhorn and some others have dramatically reduced their stakes in the iPhone maker owing to macroeconomic headwinds and muted demand in regions like China.
In our opinion, though the company faces certain demand issues in the near term, it still appears to be a value bet for long-term investors like Buffett.
Apple has a PE ratio of 13.08%, which compares favorably with the industry average of 39.8%. Moreover, from a growth perspective, the company’s PEG ratio of 1.51% is still much better than that of its peers at 3.21%. Also, our new style score system gives Apple a value score of ‘A’, which indicates that the stock still has room for growth.
Over the long run, Apple’s stock is likely to be driven by a solid business model, its technological prowess, robust cash position and a strong ecosystem. Furthermore, Apple’s Services is also expected to remain strong as it is mostly dependent on the already installed Apple devices. The company’s enterprise collaborations and scope for growth in regions like India are the other positives.
Apple currently is a Zacks Rank #2 (Buy) stock.
Some other stocks in which Berkshire Hathaway changed its positions include Wal-Mart Stores WMT, Liberty Media Co LMCK, Liberty Media Grup, Suncor Energy, and VeriSign.
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