Roger Fingas
Investor and Berkshire Hathaway chairman Warren Buffett once more came out in favor of Apple in a Monday TV interview, explaining why Berkshire bought Apple stock, and amping up the iPhone despite a sales decline in the March quarter.
"I can very easily determine the competitive position of Apple now and who's trying to chase them and how easy it is to chase them," Buffett commented to CNBC. He noted that when Berkshire made its recent investments in Apple — worth tens of billions — the shares were "much more reasonable in relation to current earnings."
The iPhone has a pair of advantages versus the competition, Buffett said, including the nature of the smartphone industry.
"You can't move people by price in the smartphone market remotely like you can move them in appliances or all kinds of things," he said, comparing against experiences with Berkshire's Nebraska Furniture Mart. "People want the product. They don't want the cheapest product."
That view may conflict with Apple's experience in China in the March quarter, where the company's revenues were down drastically year-over-year. The company has slipped in the Chinese smartphone market in large part because local vendors can offer cheaper prices — for many people, a new iPhone would cost a month or more's salary.
Apple also has loyalty working its favor however, according to Buffett.
"It's a very, very, very valuable product to people that build their lives around it," he observed. "And that's true of 8-year-olds and 80-year-olds."
Malcolm Owen
Amber Neely
Christine McKee
Chip Loder
Marko Zivkovic
46 Comments
Carl Icahn must be kicking himself, selling AAPL when it was somewhere in the $90 - $100 range. (IIRC)
This level of fundamental insight, which should be obvious to all but isn't, is why Buffet is so insanely successful.
AAPL just broke $150.85 this morning! If you sold any AAPL over the past year, too bad!
Also, it's interesting to note that Bitcoin hit a new high (if you follow these kinds of things).
When buying donuts for the morning coffee one colleague always went to the local discount grocery chain (Ruler, Aldi types). When his turn another colleague went to the local, family owned bakery that had been there for 40 years. Guess which donuts were tastier but more expensive? As Mr. Buffet says people buy iPhones not because they are the cheapest but because they WANT to buy an iPhone. At least that’s why I buy iPhones and other Apple products. Apple is doing just fine in the premium market.