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For Warren Buffett, Apple is his new Cola-Cola as the investing icon reaps $100 billion in six years

Warren Buffett's recent success from his massive Apple bet is spurring comparisons with the legend's greatest investment of all time — Coca-Cola.

 

Berkshire Hathaway began buying Apple's stock in 2016 and amassed a 5% ownership of the iPhone maker by mid-2018 with a cost $36 billion. As the tech giant's share price skyrocketed, the value of Buffett's bet has ballooned to more than $160 billion, bringing his return well over $100 billion on paper in just six years.

 

The highly lucrative investment reminded some Buffett watchers of Coca-Cola, the Oracle of Omaha's oldest and longest stock position. The consumer juggernaut's stock has soared over 2,000% since Buffett started buying in 1988, and it's still Berkshire's fourth largest equity position with 400 million shares.

 

"Buffett is having his Coca Cola moment on Apple," said Bill Smead, chief investment officer at Smead Capital Management and a Berkshire shareholder. "They both went way up the first five to seven years he's owned them."

Investing in high-flyers like Apple seemingly defies Buffett's well-known value investing principles, but the out-of-character move turned out to be his best investment over the last decade. Apple's stake also played a crucial role in helping Berkshire weather the coronavirus pandemic as other pillars of its business, including insurance and energy, took a huge hit.

 

The 91-year-old investor has become such a big fan of Apple that he now considers the tech giant as one of the "four giants" driving his conglomerate of mostly old-economy businesses he's assembled over the last five decades.

 

Apple "has been a homerun for Berkshire, no doubt," said James Shanahan, Berkshire analyst at Edward Jones. "Buffett acquired most of the position at an average cost of about one fourth of the current market price."

 

Apple's stock repurchase strategy also allows the conglomerate's ownership to increase with each dollar of the iPhone maker's earnings. Berkshire has trimmed the position, but its ownership still crept up from 5.27% at the end of 2020 to 5.43% at the end of last year.

 

The conglomerate has also enjoyed regular dividends from the tech giant over the years, averaging about $775 million annually.

 

If one were to take cues from what Buffett said when he first purchased Coca-Cola shares, it wouldn't be a far-off guess that the investor is in Apple for the long haul.

 

"In 1988 we made major purchases of Federal Home Loan Mortgage and Coca Cola. We expect to hold these securities for a long time," Buffett wrote in his 1988 annual letter. "In fact, when we own portions of outstanding businesses with outstanding managements, out favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well..."

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Big thoughts from the big money

Bill Gross sees possibility of stagflation

Bill Gross, the one-time so-called bond king who co-founded fixed income giant Pimco, said he sees the possibility of stagflation in the economy and he wouldn't buy stocks aggressively now. "Inflation now is so high on a historical basis that it's going to be difficult raising interest rates too much," Gross told CNBC. If global central banks are stuck in a low interest rate world, that could result in persistent inflation combined with a global economic slowdown, an environment dubbed stagflation, Gross said. "I wouldn't be a buyer of stocks here. I'd simply be a cautious investor," Gross added.

Charlie Munger calls inflation the No. 1 danger apart from nuclear war

Charlie Munger, vice chair of Berkshire Hathaway and Warren Buffett's longtime business partner, issued a dire warning on inflation. "It's the biggest long-range danger we have probably apart from a nuclear war," Munger told CNBC's Becky Quick. The 98-year-old investor said inflation was the driver that led to the eventual collapse of the Roman Empire. "You can argue it's the way democracies die. It's a huge danger ... If you overdo it too much, you ruin your civilization," he added.

Bill Miller says oil stocks are very cheap right now with latest energy price surge

Longtime value investor Bill Miller said Wednesday that oil stocks are very cheap right now with energy prices soaring. "Oil stocks right now are cheap," Miller told CNBC. "They are very cheap at current oil prices, but they were cheap at $60, $70 oil prices." Miller, the founder of Miller Value Partners, said he went overweight oil stocks in the spring of 2021. That's the first time in 35 years he's done so. 

 

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