What Warren Buffett and Apple can teach us about investing

Credit: Mervi Eskelinen

Warren Buffett made headlines around the world yesterday after his shock investment in Apple shares, as revealed in a regulatory filing to the United States Securities and Exchange Commission (SEC) on Monday night.

Although it has been reported that Warren Buffett himself was not behind the decision to purchase Apple shares, the Buffett-led Berkshire Hathaway owned US$1.07 billion of Apple shares as at March 31, 2016. It was one of the company’s few forays into the tech sector (Buffett has been happy to admit his lack of understanding of the sector), which is why so many investors expressed their surprise.

As such, it could be that Buffett simply has the required level of faith in his senior investment managers, Todd Combs and Ted Weschler, who reportedly made the decision to invest more than US$1 billion in the business. It could also be that Buffett now views Apple as more of a value stock than a tech stock (although there is no reason why it can’t be both), thus allowing it to pass through his net.

What will also be of interest to investors, however, is the timing of the purchase. After all, it was only three weeks ago that billionaire investor Carl Icahn, who had previously been very bullish on Apple, sold his entire stake in the business. As quoted by Bloomberg at the time, Icahn said: “I got out because I’m worried about China.”

Buffett has developed an incredible reputation for himself as an investor, after generating market-smashing returns over more than five decades at the helm of Berkshire Hathaway. That is likely the reason why investors responded so positively on Monday night after his newest position was revealed, especially in light of those concerns regarding Apple.

However, with one brilliant investor buying and another high-profile investor selling, it is clear that one will be proven wrong this time around.

Although there is certainly a high level of speculation surrounding this one trade in particular, this situation is by no means unique to Apple. At the end of the day, there will always be differences in opinion on individual stocks, sectors and even the economy as a whole.

Take BHP Billiton Limited (ASX: BHP) as a perfect example. Investors have long argued about the future of commodity prices, which has had a drastic impact on the movements in the miner’s share price.

Bellamy’s Australia Ltd (ASX: BAL) is another example right now, with some investors focusing on its growth potential and others fixated on the potential impact regulatory changes in China could have on the business (in a way, this makes Bellamy’s situation similar to the one being faced by Apple).

As Peter Lynch once said, “In this business, if you’re good, you’re right six times out of ten.” You’re bound to get some wrong, but as Warren Buffett has shown time and time again, investors can more than make up for those shortfalls with their big winners.

Could these just released franked dividend picks turn $15,000 into over $30,000?

When renowned dividend investing pros like Andrew Page issue buy alerts, it pays to listen. Because investors who followed Andrew's recommendation of Australian Pharmaceuticals in early 2015 could've doubled their money in just over a year, turning $15,000 into over $30,000 by the time he recommended they sell and lock in their profits. Chances are you won't want to miss uncovering the names of Andrew's newest share recommendation and short list of 3 dividend Best Buys Now Shares.
So click here to learn more about these potentially life-changing shares.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Apple and Berkshire Hathaway and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Motley Fool contributor Ryan Newman owns shares of Bellamy's Australia. The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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.