Stock market

Warren Buffett’s company has invested 50% of its portfolio in Apple! Should I do the same?

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Warren Buffett is one of the most famous investors in the world. He often uses a strategy called value investing, which involves buying shares when the market offers a discount to the company’s estimated fair value.

Interestingly, Buffett’s largest investment through his company, Berkshire HathawayIs apple (NASDAQ:AAPL) makes up 50% of the total portfolio. I wonder, is it wise for me to buy it too?

A balanced approach to diversity

When I first started investing, diversification was the most important strategy for me to adopt. It allowed me to not put all my eggs in one basket. In turn, it saved me from a big loss with one or two highly concentrated investments in my portfolio.

While I’m still diverse today, I’m much less so than when I first started. Today, I have around 10 companies in my portfolio. The reason for this, and why Buffett adopts a similar concentration strategy, is that it allows more money to be invested in investments that are likely to perform best.

In Apple’s case, I’m not a current shareholder, but I can see why it’s attractive to Buffett. Apple’s 10-year share price is up nearly 735%. This translates to a compound annual growth rate of about 24%, far higher than the 10.5% provided by the most popular US market index. S&P 500.

The iPhone and AI

One of the concerns that many investment professionals have expressed about Apple recently is that its markets are too saturated.

In 2023, the iPhone accounted for about 52 percent of its total revenue. This is a great achievement, but the problem with it is that many potential customers already own one. Plus, upgrades are becoming less necessary due to the already high performance of the last few models.

However, there is potentially more room for Apple to dominate. In 2023, it had about 20% of the global smartphone market share. If it can further compete with some of the other companies in the field, it has some potential to grow.

However, I think one area where the organization may be lagging behind is in AI. Although management has reportedly finalized a deal with OpenAI to bring ChatGPT features to iOS 18, I think Apple would have been stronger if it had its own competitive, advanced generative AI. The model would have been developed. the alphabet, Metaand other big tech companies.

Should I keep half my portfolio in Apple?

In my opinion, Apple is a very strong company, but there are potentially better investments with higher growth potential for me to consider. So much reliance on the iPhone and no market-leading in-house AI model makes me wary of investing in it.

That being said, Buffett clearly knows what he’s doing. I think it’s pretty unrealistic to suggest that Apple will underperform the S&P 500 anytime soon. Instead, it could be slower growth for shareholders than in the past decade.

If I want security, Apple can be a good choice. It is the second largest company by market cap, valued at $3trn. But if I want big growth, I’d better find new businesses. While I appreciate it, Apple just isn’t going on my watch list.

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