Friday, May 20, 2016

Berkshire Hathaway's Investment Boosts Apple Stocks

Warren Buffett, one of the richest men in the world, has been known to avoid investments in technology. So, it came as a huge surprise to many when it was revealed that his company, Berkshire Hathaway Inc., purchased 9.81 million shares of Apple stock in the first quarter. In his L.A. Times article, James Peltz described the reasoning behind Buffett's investment and how it affected Apple's shares and the stock market as a whole.

It is true that Buffett and his company generally avoid technology investments, mainly because Buffett admittedly doesn't understand technology enough to take the risk. However, they have made one exception in the past: Buffett's company owns a stake in IBM valued at $12.3 billion. Berkshire Hathaway's main investments are in companies like American Express, Coca-Cola, and Wells Fargo. Additionally, Berkshire owns dozens of companies such as See's Candies and Geico Insurance.

Likely because of Buffett's record of success in business and his company's large investment portfolio, Apple's stock prices rose 3.7% after the purchase was revealed on Monday. As of March 31, the end of the first quarter Berkshire Hathaway's stake in Apple was valued at $1.07 billion but is likely worth significantly less now due to declining Apple stocks. According to analysts, Berkshire likely made the purchase due to Apple's low prices in recent months. Apple's top-selling item and source of the majority of their revenue is their iPhone. The iPhone and other Apple devices had lower-than-expected sales this year, which was the main reason for lowered stock values.

Buffett has been quoted saying that the Apple purchase was made by one of his stock-picking lieutenants who did not consult Buffett before making the decision. However, Buffett seems optimistic that the stocks will regain their value and more in future months. Berkshire is always purchasing companies and shares and very rarely makes bad investments, which explains why so many normal people are suddenly investing in Apple, following Berkshire Hathaway's lead. Buffett, however, is known for his shrewd, long-term investments, and will likely drop the tech company, which he would usually avoid, when the investment gets back to its original value. Buffett doesn't understand tech companies, but some of his top advisors do. He may end up changing his stance in the future, though, if it turns out that the investment in Apple pays off as well as is expected.

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