Berkshire Hathaway's First Annual Letter from CEO Greg Abel
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Should l Buy AAPL?
Source: Fool
- Succession Outlook: In his first annual letter, CEO Greg Abel emphasized that Berkshire's core holdings, including Apple and Coca-Cola, are expected to 'compound over decades,' reflecting his confidence in their long-term potential.
- Holding Strategy Shift: Abel indicated that Berkshire's approach to selling core holdings will rely more on fundamental changes in the businesses rather than valuation, highlighting a focus on long-term economic prospects that may influence future investment decisions.
- Apple's Strong Performance: Apple's earnings per share rose 19% year-over-year in fiscal Q1 2025, with its services segment boasting a gross profit margin of 75.4%, providing robust support for Berkshire's decision to hold Apple, showcasing sustainable long-term cash flow.
- Valuation and Risk Considerations: While Apple's valuation stands at about 33 times earnings, reflecting market expectations for continued growth, Abel also cautioned about potential risks such as unexpected slowdowns in service revenue, emphasizing the importance of patience and focus on business fundamentals for long-term investors.
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Analyst Views on AAPL
Wall Street analysts forecast AAPL stock price to rise
27 Analyst Rating
17 Buy
9 Hold
1 Sell
Moderate Buy
Current: 263.750
Low
239.00
Averages
306.89
High
350.00
Current: 263.750
Low
239.00
Averages
306.89
High
350.00
About AAPL
Apple Inc. designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related services. Its product categories include iPhone, Mac, iPad, and Wearables, Home and Accessories. Its software platforms include iOS, iPadOS, macOS, watchOS, visionOS, and tvOS. Its services include advertising, AppleCare, cloud services, digital content and payment services. The Company operates various platforms, including the App Store, that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts. It also offers digital content through subscription-based services, including Apple Arcade, Apple Fitness+, Apple Music, Apple News+, and Apple TV+. Its products include iPhone 16 Pro, iPhone 16, iPhone 15, iPhone 14, iPhone SE, MacBook Air, MacBook Pro, iMac, Mac mini, Mac Studio, Mac Pro, iPad Pro, iPad Air, AirPods, AirPods Pro, AirPods Max, Apple TV, Apple Vision Pro and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- New Product Launch: At the spring event, Apple introduced the iPhone 17e with a starting price of $599, maintaining this price despite rising memory and storage chip costs, thereby attracting more consumers and enhancing market competitiveness.
- Supply Chain Advantage: Apple's strategy of securing multi-year agreements with suppliers allows it to manage price fluctuations effectively, ensuring production capacity and maintaining stable product pricing in a high-cost environment, further solidifying its market position.
- Long-term Shareholder Benefits: The pricing strategy of the iPhone 17e will enhance Apple's competitiveness in price-sensitive markets, likely attracting more users into the Apple ecosystem, which will promote sales of subsequent products and services, ultimately benefiting shareholders in the long run.
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- Long-Term Investment Philosophy: Over 60 years, Buffett achieved a compounded annual growth rate exceeding 19%, significantly outpacing the S&P 500's 10%, indicating the effectiveness of his investment strategy and its appeal to investors seeking inspiration.
- Apple Holdings: Buffett has held Apple shares since 2016, and despite selling some recently to lock in gains, it remains the largest holding in his portfolio, reflecting his ongoing confidence in the company and its strong brand moat.
- Coca-Cola's Steady Performance: Buffett has held Coca-Cola shares since the late 1980s, making it the fourth-largest holding in his portfolio; its status as a
See More
Three Stocks Reflecting Buffett's Investment Principles
- Apple's Stock Holding: Buffett has held Apple shares since 2016, witnessing an approximately 800% increase, and despite selling some shares last year, it remains the largest holding in his portfolio, indicating his ongoing confidence in the company.
- Coca-Cola's Long-Term Investment: Buffett has owned Coca-Cola stock since the late 1980s, making it the fourth-largest holding in his portfolio; its strong brand and global distribution network ensure steady earnings growth, complemented by over 50 years of dividend increases, showcasing its reliability.
- American Express's Robust Performance: Buffett's investment in American Express dates back to the 1960s, and it is now the second-largest holding in his portfolio, with 2023 revenues exceeding $72 billion, demonstrating resilience during economic fluctuations and making it a solid long-term investment choice.
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- Industry Response: The Information Technology Industry Council (ITI) sent a letter to Defense Secretary Pete Hegseth expressing concerns over his designation of a U.S. company as a supply chain risk, indirectly referencing Anthropic, which could jeopardize its future government contracts.
- Contract Dispute: ITI emphasized that contract disputes should be resolved through ongoing negotiations or by selecting alternative suppliers via established procurement channels rather than through emergency measures like supply chain risk designations, which are typically reserved for entities identified as foreign adversaries, reflecting strong opposition to government actions.
- Procedural Protections: The letter referenced the Federal Acquisition Supply Chain Security Act of 2018 and the Federal Acquisition Security Council (FASCSA), highlighting the importance of due process for private companies, including notice and response opportunities before any risk designation is made, underscoring ITI's commitment to procedural fairness.
- Anthropic's Position: Anthropic expressed deep sadness over the decision in a statement, arguing that labeling it as a supply chain risk is unprecedented and historically reserved for U.S. adversaries, which could severely impact its relationship with the Defense Department and the broader tech industry.
See More
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- New CEO Transition: With Warren Buffett retiring on December 31, Greg Abel officially took over the day-to-day operations and the $319 billion investment portfolio of Berkshire Hathaway on January 1, marking a significant governance shift, as Abel vows to uphold Buffett's investment philosophy.
- Expansion of 'Forever' Holdings: In his first letter to shareholders, Abel announced the inclusion of Moody's and Apple into Berkshire's 'forever' holdings, with Moody's being the third-longest-held stock since 2000, boasting a 41% annual yield, showcasing its resilience in economic fluctuations.
- Valuation Considerations for Apple: While Abel considers Apple a long-term investment, the decision raises eyebrows given Buffett's sale of 75% of Berkshire's Apple shares prior to retirement, especially with Apple's current P/E ratio at 33.4, reflecting a commitment to value investing.
- Impact of Share Buybacks: Since 2013, Apple has repurchased over $841 billion in shares, reducing its outstanding shares by 44%, a strategy that has significantly boosted earnings per share, indicating that Abel's decisions may influence Berkshire's stake in Apple, reflecting sensitivity to market dynamics.
See More
Apple Unveils New Products at Spring Event
- iPhone 17e Pricing Strategy: Apple introduced the iPhone 17e at a starting price of $599 during its spring event, maintaining last year's price despite rising component costs, aiming to capture market share through price stability.
- Increased Storage Capacity: The new iPhone 17e features double the starting storage at 256GB, and despite higher costs, Apple opted not to raise prices, showcasing its supply chain management prowess that could attract more consumers.
- Competitive Market Advantage: This pricing strategy enhances Apple's competitiveness in price-sensitive markets like China, where it faces lower-priced rivals such as Vivo, Huawei, and Xiaomi, potentially aiding in regaining market share.
- Long-Term Shareholder Benefits: The iPhone serves as a starting point for customer relationships with Apple, likely driving sales of other products and services in the future, and while the stock has struggled recently, this strategy offers long-term growth potential for shareholders.
See More
