Warren Buffett plans to step down as CEO of Berkshire Hathaway by the end of this year. This leadership change raises key questions about the future of Berkshire Hathaway and Apple.
Buffett’s decision to invest in Apple back in 2016 marked a historic move for Berkshire Hathaway. At that time, Apple traded at a low valuation with slowing growth. Yet, Buffett believed in the iPhone’s long-term popularity. He purchased shares when they were considered undervalued by most investors.
Since then, Apple has delivered strong returns. Its stock surged, and it often held the title of the world’s largest company. However, the company now faces slower growth and a higher valuation. Many wonder if it still fits Buffett’s value-investing strategy.
Berkshire Hathaway and Apple have been closely tied for nearly a decade. But that connection may soon change. Greg Abel, Buffett’s successor, could take a different approach.
In late 2023, Berkshire began reducing its Apple stake. It sold off more than 600 million shares, dropping its position from over 915 million to 300 million. The value of the remaining stake still stands near $75 billion.
Despite this, Apple’s recent financial results show only modest growth. Its revenue rose just 5% last quarter. This is far below what growth investors expect. Apple’s valuation also remains well above the S&P 500 average.
Furthermore, Apple has lagged in artificial intelligence innovation. Several competitors have taken the lead in AI-powered smartphones. Meanwhile, Apple continues to update existing products without introducing breakthrough technology.
The smartphone upgrade cycle has also slowed. Consumers now wait three to four years before buying a new iPhone. Rising production costs in countries like India and the U.S. could also impact profit margins.
Given these challenges, the future between Berkshire Hathaway and Apple appears uncertain. With new leadership in place, the investment strategy may shift. Investors should watch closely to see what direction Greg Abel chooses.
Clearly, Berkshire Hathaway and Apple no longer share the same obvious growth path. A strategic pivot could be on the horizon.
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