Warren Buffett makes over $120 billion on Apple’s trot to $3 trillion, among his best bets ever

Warren Buffett’s out-of-character bet on Apple may end up being one of his winningest investments, making more than $120 billion on paper as the tech giant shattered yet another record to top a $3 trillion market valuation this week.

Berkshire Hathaway began buying Apple stock in 2016 and by mid-2018, the conglomerate accumulated a 5% ownership in the iPhone-maker, a stake that cost $36 billion. Flash forward to 2022 and the Apple investment is now worth $160 billion as the massive rally extended into the new year.

“Without a doubt, it is one of the strongest investments that Berkshire has made in the last decade,” said James Shanahan, Berkshire analyst at Edward Jones.

Other than Apple’s giant appreciation in share price, it has also been a lucrative bet for Berkshire because of its hefty payouts. Berkshire has enjoyed regular dividends, averaging about $775 million annually.

Buffett’s aversion to high-flying tech stocks has been well documented over the decades, but the “Oracle of Omaha” warmed up to the sector in the last decade with help from his investing deputies Todd Combs and Ted Weschler. Berkshire’s Apple stake now makes up for more than 40% of its equity portfolio, according to InsiderScore.com calculations. The conglomerate is Apple’s largest shareholder, outside of index and exchange-traded fund providers.

The billionaire investor has called Apple Berkshire’s “third-largest business,” after its insurance and railroad interests. Buffett previously said iPhone is a “sticky” product, keeping people within the company’s ecosystem.

“It’s probably the best business I know in the world,” Buffett said in a CNBC interview in February 2020. “I don’t think of Apple as a stock. I think of it as our third business.”

But you’re not likely to hear from Buffett crowing about the winning trade since that’s not his style and he is often quick to point out when shares appreciate that the gains are not real yet and subject to further fluctuations.

Still, the investor has realized some of that profit in real terms over the years. Since 2018, Berkshire has been trimming its Apple stake slightly with the conglomerate pocketing $11 billion in 2020. However, because of Apple’s repurchase programs, which shrank the number of its outstanding shares, Berkshire’s overall stake in the tech company has actually gotten bigger.

“Berkshire’s investment in Apple vividly illustrates the power of repurchases,” the conglomerate said in its 2020 annual report. “Despite that sale [in 2020] – voila! – Berkshire now owns 5.4% of Apple. That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding.”

“But that’s far from all of the good news. Because we also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018,” Berkshire said in the report.

The investment in the tech giant played a crucial role in helping the conglomerate weather the Covid-19 crisis in 2020 as other pillars of its business, including insurance and energy, took a huge hit.