7/29/2019 # # # # # # General after Would Billionaire Warren Buffett Buy Apple _mcmansions_ (1)

1/5

General afterWould Billionaire Warren Buffett Buy Apple?

AAPL

33

iPhone iPad

GOOG 70

iPhone50 iPad20

iPhone Android

eMarketer

22 2014 17

Facebook 8 1,000

P / E 8.69 1.37

33 13

- IBMIBM - P / IBM IBM 17

IBM IBM 500

117 10

IBM IBM

iPref $ 137

http://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffetthttp://caps.fool.com/Ticker/AAPL.aspxhttp://caps.fool.com/Ticker/GOOG.aspxhttp://articles.latimes.com/2012/sep/19/business/la-fi-tn-emarketer-google-to-outpace-facebook-in-us-online-display-ads-20120919http://articles.latimes.com/2012/sep/19/business/la-fi-tn-emarketer-google-to-outpace-facebook-in-us-online-display-ads-20120919http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://caps.fool.com/Ticker/IBM.aspxhttp://www.gurufocus.com/StockBuy.php?GuruName=David+Einhornhttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://www.gurufocus.com/StockBuy.php?GuruName=David+Einhornhttp://caps.fool.com/Ticker/IBM.aspxhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://articles.latimes.com/2012/sep/19/business/la-fi-tn-emarketer-google-to-outpace-facebook-in-us-online-display-ads-20120919http://caps.fool.com/Ticker/GOOG.aspxhttp://caps.fool.com/Ticker/AAPL.aspxhttp://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffett

7/29/2019 # # # # # # General after Would Billionaire Warren Buffett Buy Apple _mcmansions_ (1)

2/5

705

1000 $ 440$ 260

100

Brookside 100

7

100

9.3

100 3.2

iPhone

Android 2012

Gartner1Android 702iOS 21

4

Android

22012

Gartner1 232 18 9

2013 iPhone

IWATCH

IT

http://weibo.com/mcmansions http://jzgdfdcsytxsj.t.sohu.com

http://t.qq.com/nanjingdudongbie(IT

http://www.117t.com/space_mcmansions.html) (IT http://www.117t.com/space_mcmansions.html)

It's no secret that Warren Buffett loves strong consumer brands

that generate plenty of cash. He's the ultimate value investor. Well then,

http://www.insidermonkey.com/insider-trading/company/apple+inc/320193/http://www.insidermonkey.com/blog/four-warren-buffett-favorites-you-ought-to-own-international-business-machines-corp-ibm-wells-fargo-co-wfc-78441/http://www.gurufocus.com/StockBuy.php?GuruName=Leon+Coopermanhttp://www.xici.net/t.asp?http://nj.58.com/sou/jh_%E4%B8%93%E4%B8%9A/http://www.xici.net/t.asp?http://nj.58.com/sou/jh_%E7%AD%96%E5%88%92/http://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffetthttp://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffetthttp://www.xici.net/t.asp?http://nj.58.com/sou/jh_%E7%AD%96%E5%88%92/http://www.xici.net/t.asp?http://nj.58.com/sou/jh_%E4%B8%93%E4%B8%9A/http://www.gurufocus.com/StockBuy.php?GuruName=Leon+Coopermanhttp://www.insidermonkey.com/blog/four-warren-buffett-favorites-you-ought-to-own-international-business-machines-corp-ibm-wells-fargo-co-wfc-78441/http://www.insidermonkey.com/insider-trading/company/apple+inc/320193/

7/29/2019 # # # # # # General after Would Billionaire Warren Buffett Buy Apple _mcmansions_ (1)

3/5

why hasn't he bought Apple (AAPL) stock? It's perhaps his unwillingness

to go along with the crowd or to follow the likes of some of his fellow

billionaires. Buffett has famously said in the past that he doesn't

understand technology and he doesn't want to backtrack. He did just buy

H.J. Heinz and I doubt he fully understands how ketchup gets made or the

manufacturing process. Apple is a similar company to Heinz, making a

product that gets manufactured and sold, except it is a tech product rather

than a consumable product.

Strong Consumer Brand with Product LoyaltyI argue that Apple isn't a technology company in the conventional sense,

but more of a consumer products company. As anyone knows from going to

an Apple store or seeing a new Apple product launch, there is no loyalty

like Apple loyalty. Customers line up for hours to get the latest Appleproducts. That is why the company can achieve a 33% operating margin.

Customers pay the premium for Apple products because they cannot live

without their iPhones or iPads. Owning Apple products is such an integral

part of the loyal user's daily life that switching to another brand is

not an option. In addition, there isn't a company that offers the same

range of products as Apple.

Compare the products of Apple with the likes of Google (GOOG). WouldBuffett ever consider buying this tech company that utilizes search

algorithms? Probably not. Unlike Google, Apple gets 70% of its revenue

from two stable products, its iPhone (50%) and iPad (20%); however, Google

is one of Apple's chief competitors in the smartphone industry. But Apple

will be able to continue to steal market share from Google in the mobile

sector as Apple continues to focus on its key product, the iPhone. Google's

true motives for its Android OS and Motorola phones lie in its plans to

extend beyond desktop searches into mobile searches. As a result, I think

Google is more motivated to be a mobile search and mobile ad leader

regardless of its actual OS or hardware market shares.eMarketer projects

that Google will be the fastest growing mobile ad platform over the mediumterm, capturing 22% of the market by 2014, where Facebook will be secondwith 17% of the market, and Yahoo third at 8% (see if Google is headingto $1,000).

Compelling ValuationThe current valuation of Apple appears very attractive, even if you

classify it as a mega-cap stock with limited future growth (see more about

Apple's new industry). Nonetheless, Apple is a company that has a forward

P/E of 8.69 and $137 billion in cash. Given Apple's current market cap,

http://caps.fool.com/Ticker/AAPL.aspxhttp://caps.fool.com/Ticker/GOOG.aspxhttp://articles.latimes.com/2012/sep/19/business/la-fi-tn-emarketer-google-to-outpace-facebook-in-us-online-display-ads-20120919http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://seekingalpha.com/article/1168841-why-apple-is-still-a-buy-despite-its-new-industry-classificationhttp://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://www.insidermonkey.com/blog/is-google-inc-goog-stock-heading-for-1000-80068/http://articles.latimes.com/2012/sep/19/business/la-fi-tn-emarketer-google-to-outpace-facebook-in-us-online-display-ads-20120919http://caps.fool.com/Ticker/GOOG.aspxhttp://caps.fool.com/Ticker/AAPL.aspx

7/29/2019 # # # # # # General after Would Billionaire Warren Buffett Buy Apple _mcmansions_ (1)

4/5

its cash position represents 33% of its entire market valuation, with the

company generating some $13 billion in cash per quarter. In looking at

Buffett and Berkshire Hathaway's five largest holdingsCoca-Cola, IBM (IBM), Wells Fargo, AmericanExpress and Proctor & Gamble all have higher P/Es than Apple.Buffett Bought IBMBuffett's first foray into technology was his large purchase of IBM, his

third largest position representing over 17% of his public securities

portfolio. Buffett also added a small position inVeriSign, another techcompany, during the fourth quarter. One of the main things that Buffett

likes about IBM is its aggressive stock buyback plan. IBM last year added

$5 billion to its stock buyback plan, bringing the total buyback to $11.7

billion. Apple last year announced a $10 billion share buyback plan. It'sstill less than IBM's and IBM has a fraction of the cash on hand as Apple.

Maybe Buffett wants to see more cash returned to shareholders? He's not

alone, as that is what most money managers are looking for. Most

recently David Einhorn of Greenlight Capital sued Apple, wanting them

to issue preferred stock to unlock shareholder value and free up some of

its cash hoard (see Einhorn's iPref presentation). Does Apple really need

$137 billion in cash?

Buffett Loves to Buy When No One Else IsIt's pretty safe to assume that the fast money has been dumping Apple stock.

Apple fell from grace with hedge funds during the fourth quarter, losing

its top spot as the most-owned company. Many of the momentum players feel

that the company cannot continue to grow as it did in the past. They have

sold their long positions or shorted the stock (see hedge fund activity).

This is the time when Buffett likes to buy best. He loves to come in when

something is out of favor and beaten down. The high for the stock last

year was $705. Many traders thought $1000 was the next stop and have gottenburned in this downturn. At around $440, Apple is over $260 off its

all-time high in a few short months. This could be a solid time for Buffett

to buy (see what Buffett is buying). Here are some of the major hedge funds

that have been selling off their stake since the fourth quarter.

Billionaire Leon Cooperman and Omega Advisors sold off 100% of his

stake.

Bain Capital's Brookside Capital also sold off 100% of its shares,

where during the third quarter Apple was 7% of its portfolio.

http://caps.fool.com/Ticker/IBM.aspxhttp://www.gurufocus.com/StockBuy.php?GuruName=David+Einhornhttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://www.insidermonkey.com/insider-trading/company/apple+inc/320193/http://www.insidermonkey.com/blog/four-warren-buffett-favorites-you-ought-to-own-international-business-machines-corp-ibm-wells-fargo-co-wfc-78441/http://www.gurufocus.com/StockBuy.php?GuruName=Leon+Coopermanhttp://www.gurufocus.com/StockBuy.php?GuruName=Leon+Coopermanhttp://www.insidermonkey.com/blog/four-warren-buffett-favorites-you-ought-to-own-international-business-machines-corp-ibm-wells-fargo-co-wfc-78441/http://www.insidermonkey.com/insider-trading/company/apple+inc/320193/http://stockpucker.com/blog/2013/2/22/billionaire-david-einhorns-apple-aapl-presentation#.UTBshKLvs4khttp://www.gurufocus.com/StockBuy.php?GuruName=David+Einhornhttp://caps.fool.com/Ticker/IBM.aspx

7/29/2019 # # # # # # General after Would Billionaire Warren Buffett Buy Apple _mcmansions_ (1)

5/5

Billionaire Dan Loeb and Third Point sold of 100% of its stake, which

was 9.3% of its third quarter portfolio.

Billionaire Stephen Mandel and Lone Pine Capital sold 100% of their

shares, which had been 3.2% of Lone Pine's third quarter portfolio.

What's Next for Apple?As far as the current situation goes, Apple is one of the leaders in the

market with its iPhone, but I still see room to grow. The company is in

a heated battle with Google for mobile phone dominance, with Google's

Android operating system currently leading the way.

Mobile operating system market share (2012 fourth quarter, source:

Gartner)

1. Android 70%

2. iOS 21%

3. Blackberry 4%

However, I am less concerned with Google's dominant position, as it allows

more room for Apple to grow and capture market share. What's more is that

although Apple is still battling Android over mobile OS, Apple also has

a dominant position in the hardware game, whereas Google is well behind.

Apple is third with respect to mobile hardware market share, where

Google's Motorola is ninth with 2%.

Mobile Phone Market Share (2012 fourth quarter, source: Gartner)

1. Samsung 23%2. Nokia 18%3. Apple 9%

Apple does have a lot going for it in 2013. The company will release a

new iPhone and there's the potential deal with China Mobile, the world's

largest mobile phone carrier. Chine Mobile's market share in China is

falling and now is the time for it to do a deal with Apple. There's also

the potential iWatch and the market is clamoring for iTV from Apple. Apple

fans want Apple to revolutionize the television the same way they did with

the mobile phone. If Apple does that, Buffett won't be the only one wishing

he bought Apple at these levels!