"Should You Buy Apple?"
Apple is the biggest equity holding of Berkshire Hathaway. It is worth $165 billion. As of March 31, the portfolio allocation is 48%. Berkshire Hathaway's owner, Warren Buffet, thinks Apple is special. He likes Apple because it has traits he looks for in a business.
If you follow one of the smartest stock market experts, your portfolio can improve. You should consider buying Apple stock even though it's gone up 39% this year. Here are three reasons why.
The iPhone is very successful, making up 54% of Apple's revenue in Q2 of fiscal year 2023. Apple is also growing services, with revenue of $13.3 billion in Q2 of 2020 and $20.9 billion in the most recent quarter. The services segment is growing faster than Apple's product segment.
Apple gains financially by offering services with a gross margin of 71% in comparison to products, which have a lower margin of 37%. This shift towards services will increase the revenue and profit of the company.
Apple's services make customers loyal, as they work well with the company's hardware and software offerings. There are over 2 billion Apple devices in use, and their owners are less likely to move to other platforms. This is because Apple's services like Music, Pay, and TV+ keep users engaged.
Buffett believes that a great company can raise prices without affecting demand. A company that struggles to raise prices is not a good company.
Apple is good at setting prices and that's why Berkshire Hathaway has invested in them. iPhones have gotten more expensive since 2007, but people keep buying them.
Prices of services have increased. Apple has created unique hardware products with user-friendly software to justify its pricing power.
Impressive Finances
The economy is uncertain and inflation is high. People worry about a recession. Investors should own financially secure companies. Apple is a good choice.
Apple's gross margin grew from 38.5% to 43.3% from 2017 to 2022. The operating margin also rose from 26.8% to 30.3%. This is great for the company because it means they are becoming more profitable. They benefit from pricing power and economies of scale. Consumer hardware is tough to make money in, but Apple is doing well.
This company makes a lot of free cash flow. They made $111 billion in fiscal 2022. They give money back to shareholders. They bought $39 billion worth of stock in the last six months. They also pay a dividend that gives a 0.5% yield.
The reasons to own Apple stock are really good. It might be a good investment for a long time.
Neil Patel works in Berkshire Hathaway. The Motley Fool likes Apple and Berkshire Hathaway, and they have some positions there. The Motley Fool tells people about this through a disclosure policy.
