Despite weakness in the recent quarterly result, Apple AAPL shares may regain all their sweetness in the near term as billionaire investor Warren Buffett has bet big on it. Warren Buffett and his Berkshire Hathaway (BRKB) loaded up on Apple stocks in the fourth quarter.
Berkshire Hathaway now owns a 5.8% stake in Apple after buying 20.76 million shares during the quarter, bringing its total holdings to 915.6 million as of Dec 31, according to the company’s Schedule 13G filing with the Securities and Exchange Commission Tuesday, as quoted on investors.com.
What About Apple’s Business Model?
Apple’s overall sales for the holiday quarter were down about 5% year over year, marking the first year-over-year sales decline since 2019. Apple also recently recorded the biggest annual quarterly revenue drop since September 2016. However, the company is benefiting from continued momentum in the Services segment, driven by strong App Store sales and the robust adoption of Apple Music and Apple Pay.
iPhone sales may not be the real attraction of Apple now. But Apple’s focus on autonomous vehicles and augmented reality/virtual reality technologies presents a growth opportunity for the long haul. Apple returned $28 billion in the recently-reported quarter through dividend payouts ($3.7 billion) and share repurchases ($25.2 billion).
What Do Indicators Say About Apple’s Value Status?
Going by valuation metrics, the P/E (ttm) of AAPL is 26.1 times versus the industry-average of 22.4 times. The forward P/E of AAPL is 25.3 times versus the industry score of 22.3 times. Though these measures point to a higher valuation of Apple than the industry, a higher P/E is not always a sign of worry. It shows investors’ confidence in a particular stock among the bunch.
Investors should note that the return-on-equity of Apple is 163.5%, higher than the industry average of 134.1%. Plus, both return-on-assets and return-on-capital of Apple are marginally higher than the industry measures. The estimated 3-5 year EPS growth of Apple is now 12.5% versus the industry measure of 10.5%.
Investors should note that the AAPL stock has a Zacks Rank #3 (Hold). It has a Growth Score of A at the time of writing. The above-said numbers explain why Buffett is betting big on Apple shares in his portfolio.
Are ETFs Better Bets?
Investors intending to follow Warren Buffett but still wary of the slowing sales of Apple may take the ETF route. This is because ETFs helps investors to mitigate one company’s average performance with the other companies’ stellar results.
Below we highlight a few ETFs with heavy exposure to Apple for investors seeking to bet on the stock with much lower risk.
iShares Dow Jones US Technology ETF IYW – AAPL takes the second spot with 18.07% weight. The fund has a Zacks Rank #2 (Buy).
Select Sector SPDR Technology ETF XLK – AAPL holds the second spot with 22.69% weight. The fund has a Zacks Rank #2.
Vanguard Information Technology ETF VGT – AAPL occupies the first location with 20.40% weight. The fund has a Zacks Rank #2.
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Apple Inc. (AAPL) : Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
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