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Apple’s latest innovation: a big stake for Berkshire

AP, OMAHA, Nebraska

A 3D printed Apple logo is seen in front of a stock graph in a photo illustration taken on April 28.

Photo: Reuters

Investors might question Warren Buffett’s long-standing aversion to tech stocks after his Berkshire Hathaway Inc bought 9.8 million shares of Apple Inc.

Buffett has always avoided technology companies because he said it was too hard to pick which ones would prevail long-term, although he made an exception to that rule to buy a major IBM Corp stake in 2011.

The stake comes with Apple’s shares under considerable pressure. Billions in value have been wiped from the books since the company reported a sizable drop in iPhone sales late last month.

Apple shares, down 15 percent over the past month, jumped nearly 4 percent on Monday.

Buffett was also reported to be considering joining a bid to acquire Yahoo Inc.

However, Buffett on Monday told CNBC he would only act as a potential financing partner for Quicken Loans founder Dan Gilbert’s bid.

Buffett is known for investing in comparatively boring companies when he understands the industry well, such as auto insurer Geico Corp, Wells Fargo & Co, Coca-Cola Co, American Express Co and See’s Candy.

Buffett avoids investing in areas outside his expertise.

When Buffett is asked about technology investments, he usually explains his position in terms of candy and soda.

Buffett says he thinks it is too hard to determine what tech companies will be worth in the future because their businesses evolve so quickly, but that he is certain Snickers candy bars and Coca-Cola will remain popular decades from now.

“Whenever you get a truly extraordinary business, they’re the hardest ones to value,” Buffett said last year on CNBC. “It’s much easier for me to figure out what Coca-Cola is worth than Google or Facebook or you name it.”

Berkshire revealed the new Apple investment on Monday in a filing with the US Securities and Exchange Commission detailing a number of changes to its US$129 billion portfolio.

However, the filing did not disclose who made the Apple investment. Besides Buffett, Berkshire has two other investment managers, who each handle about US$9 billion.

Buffett has said that his investments tend to be the larger ones in the portfolio. He says investments of less than US$1 billion are likely to be the work of Ted Weschler or Todd Combs. The Apple stake was worth about US$900 million on Monday.

Berkshire also added 198,853 IBM shares during the quarter to give it 81.2 million shares. Buffett has stuck with IBM even though it continues to sell for less than the roughly US$170 a share he paid for most of the shares.

When Buffett bought IBM stock in 2011, he said he viewed it more as a service business that customers were unlikely to drop than a tech business dependent on selling computer hardware cheaply. IBM focuses more on software and technology services these days.

Besides investments, Berkshire owns more than 90 companies in a variety of industries, including insurance, utilities, BNSF railroad unit, furniture and jewelry.

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