Buffett’s Berkshire Hathaway (BRK) Invests $1 Billion in Apple (AAPL)

Berkshire Hathaway

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), the multinational conglomerate controlled by billionaire investor Warren Buffett, acquired a stake in Apple Inc (NASDAQ:AAPL) worth around $1.1 billion

The stock price of the iPhone maker increased more than 3% to $93.75 per share at the time of this writing around 1:48 in the afternoon in New York.

Based on its regulatory filing with the Securities and Exchange Commission (SEC), Berkshire Hathaway acquired 9,811,747 shares of Apple during the first quarter.

It was recently reported that Buffett is supporting a consortium of investors bidding for the internet assets of Yahoo Inc. (NASDAQ:YHOO).

Apple stock is cheap

Steve Wallman, a money manager in Middleton, Wisconsin told Bloomberg that Berkshire Hathaway’s decision to acquire a huge position in Apple is a “no brainer.” He said, “I don’t think it’s a great stretch for Berkshire. The company is cheap. It has a boat load of cash.

On the other hand, Jeff Mathews, an author of Berkshire-related books, commented, “Apple at the current valuation makes a ton of sense; it’s a consumer-product company more than a tech company. The company has a great financial model, a great brand name and a cheap stock.”

Apple is currently trading at a multiple of 10.5 times its earnings per share, cheaper than its peers trading at a multiple of 16.4 times.

Apple working on various projects

Market observers suggested that Berkshire Hathaway’s investment showed its confidence of the iPhone maker’s ability to develop products that would reignite its revenue growth. Apple’s may be able to re-accelerate its sales momentum with the upcoming iPhone 7 through other product categories including autonomous driving or virtual reality hardware.

Apple recently invested $1 billion in China Didi Chuxing, which accounts 87% share of the private car-hailing service market in the country.  The tech giant’s CEO Tim Cook believed that the investment would deliver strong return over time. He also stated that they remain focused on developing in-car experience through its CarPlay system.

CM Research Managing Director Cyrus Mewawala believes that Apple is a great investment citing the reason that the tech giant is exploring new technologies and shifting toward services.

According to him, “What would make this stock a good buy is a whole load of projects we know they’re working on. They’re working on a TV, a car, a whole bunch of apps coming for the Apple Watch. We know mobile payments has just started off.”