Apple Inc. (AAPL) Is Warren Buffett's New Favorite Stock
Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) made a big investment in Apple Inc. ( AAPL) near the end of 2017, according to financial reports filed this week.
Berkshire's quarterly 13F filing shows that Buffett purchased 31.2 million shares of Apple in the fourth quarter of 2018, bringing Berkshire Hathaway's stake in the company to $28 billion. Apple is now Berkshire's largest single holding.
Buffett also dumped 94 percent of its stake in International Business Machines Corp. ( IBM). Berkshire Hathaway's stake in IBM is now down to a relatively modest $314 million.
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The biggest surprise included in the filing was Berkshire's new $358 million stake in Teva Pharmaceuticals ( TEVA). Buffett's endorsement sent shares of the pharmaceutical company soaring 8.8 percent on Thursday.
Buffett also sold 6 million shares of Wells Fargo & Co ( WFC) in the fourth quarter, likely in order to stay below the 10 percent ownership level. Companies that own more than 10 percent of large U.S. banks are subject to additional Federal Reserve regulations.
Berkshire Hathaway's first-quarter 13F filing will be a critical one for Wells Fargo investors. Earlier this month, the Federal Reserve ordered Wells Fargo not to grow its assets beyond its current $1.95 trillion level until it "sufficiently improves its governance and controls." The next filing will reveal whether or not Buffett is sticking with Wells Fargo following the Fed's actions.
Berkshire Hathaway also added to its stakes in U.S. Bancorp ( USB), Bank of New York Mellon Corp ( BK) and Monsanto Co. ( MON) and reduced its positions in American Airlines Group ( AAL), General Motors Co. ( GM) and Sanofi ( SNY).
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Morningstar analyst Greggory Warren says the most important move of the quarter was swapping $5.2 billion of IBM for $5.1 billion of Apple stock.
"This lifted the latter to Berkshire's largest stock holding, with Apple accounting for 14.6 percent of the insurer's $191.2 billion portfolio at the end of 2017, and whittled down the company's stake in IBM to 2 million shares, which we do not expect to remain in the portfolio for long," Warren says.
Morningstar has a "fairly valued" rating and $220 fair value estimate for Berkshire Hathaway's Class B stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
