MENU

Warren Buffett thinks Apple is doing just fine

It’s been a while since we’ve heard Warren Buffett’s perspective on Apple‘s (NASDAQ:AAPL) stock. Recently, however, the Oracle of Omaha offered his latest opinion on the highest-profile company in tech: Apple management is doing just fine.

Buffett’s opinion on Apple
Buffett has voiced his thoughts on Apple stock several times in the last few years. In 2012, he recounted a time when Steve Jobs called him up for advice on the company’s burgeoning cash hoard. After Jobs said he thought Apple’s stock was undervalued, trading at about US$200 per share at the time, Buffett said, “I would use it for buybacks if I thought my stock was undervalued.”

In March of this year, Buffett said Apple should buy back stock and ignore hedge fund manager David Einhorn’s advice for a new dividend-paying preferred stock. In April, Apple did indeed announce a massive boost to its share repurchase program and ignored Einhorn’s advice. Expanding the company’s capital return program to US$100 billion, Apple took Buffett’s advice and significantly boosted its share repurchase authorisation from US$10 billion to US$60 billion.

Now Buffett is back with his opinion on Apple. “I think the Apple management and directors have done a pretty darned good job of running the company,” he told CNBC recently when asked for his thoughts on Carl Icahn’s suggestion that Apple buy back even more stock. Apple shouldn’t worry about Icahn, he seemed to suggest. Taking the idea further, Buffett said: “I do not think that companies should be run primarily to please Wall Street, and largely shareholders who are going to sell. I believe in running Berkshire for the shareholders who are going to stay, and not the ones who are going to leave.”

Taking the long view
Given both Warren Buffett’s approval of Apple’s management and Carl Icahn’s bullish outlook on the stock, is the Street’s focus on Apple’s current issues too shortsighted?

Sure, the iPhone 5c wasn’t as cheap as investors expected. Yes, the company’s gross profit margin may be down about 700 basis points from the year-ago quarter. But by simply taking a few steps back, Apple looks like a cash cow with a generous share repurchase program and a meaningful dividend yield of 2.5%. Best of all, the stock is incredibly cheap (even at US$500), trading at just 12.6 times earnings and just 10.7 times free cash flow.

It’s worth noting, however, that neither Buffett nor Icahn are really tech investors. In fact, they’re historically tech averse much of the time. Both of their opinions, therefore, should be taken with a grain of salt. But they’re both obviously great investors, so their thoughts are worth some consideration. If nothing else, Buffett’s approval of Apple management and Icahn’s bullishness on the stock help assure long-term Apple shareholders that the company is doing just fine.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Daniel Sparks, originally appeared on fool.com.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.