Warren Buffett deflects concerns about iPhone price, sales & AAPL share ownership

Posted:
in AAPL Investors
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."
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Comments

  • Reply 1 of 46
    slprescottslprescott Posts: 742member
    Carl Icahn must be kicking himself, selling AAPL when it was somewhere in the $90 - $100 range. (IIRC)
    patchythepiratebadmonkwatto_cobra
  • Reply 2 of 46
    slurpyslurpy Posts: 5,034member
    This level of fundamental insight, which should be obvious to all but isn't, is why Buffet is so insanely successful. 
    mdriftmeyerStrangeDaysMikeymikewatto_cobrahydrogen
  • Reply 3 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    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).
    edited May 2017
  • Reply 4 of 46
    lkrupplkrupp Posts: 6,396member
    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.
    argonautfotoformatStrangeDayswatto_cobra
  • Reply 5 of 46
    maestro64maestro64 Posts: 4,262member
    sog35 said:
    Carl Icahn must be kicking himself, selling AAPL when it was somewhere in the $90 - $100 range. (IIRC)
    the main reason Icahn sold was because his oil bets went sour and he needed cash.

    still a bad decision by him.

    Actually I think Icahn investment in Apple was holding apple back, everyone know he is only interested in forcing a company to do what he wants and breaking them up so he make money. when he dumped out the stock started to head north.
    SpamSandwichrusswwatto_cobra
  • Reply 6 of 46
    wood1208wood1208 Posts: 1,556member
    Apple stock - you own it, don't trade it. You will miss huge upside when trying to protect the small down side.
    watto_cobra
  • Reply 7 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    maestro64 said:
    sog35 said:
    Carl Icahn must be kicking himself, selling AAPL when it was somewhere in the $90 - $100 range. (IIRC)
    the main reason Icahn sold was because his oil bets went sour and he needed cash.

    still a bad decision by him.

    Actually I think Icahn investment in Apple was holding apple back, everyone know he is only interested in forcing a company to do what he wants and breaking them up so he make money. when he dumped out the stock started to head north.
    Icahn does have that reputation.
    watto_cobra
  • Reply 8 of 46
    .
    slurpy said:
    This level of fundamental insight, which should be obvious to all but isn't, is why Buffet is so insanely successful. 
    That is naive and on surface. I might think some other parts play key role in his success. We will not discuss them here.
    patchythepirate
  • Reply 9 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    $151.15!
  • Reply 10 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    .
    slurpy said:
    This level of fundamental insight, which should be obvious to all but isn't, is why Buffet is so insanely successful. 
    That is naive and on surface. I might think some other parts play key role in his success. We will not discuss them here.
    "Buy and hold forever" is one reason.
  • Reply 11 of 46
    wood1208 said:
    Apple stock - you own it, don't trade it. You will miss huge upside when trying to protect the small down side.
    Yeah, that's exactly my problem. My AAPL stock is worth 4 times my total investment, but I can never bear to sell any of it. And frankly, it's too big a portion of my total assets so I can't justify buying more. But since I don't need the cash, it's a great "problem" to have.
    anantksundaram
  • Reply 12 of 46
    gmgravytraingmgravytrain Posts: 708member
    The one thing that impresses me now about Warren Buffett is that he can admit to his mistakes. Most of those other big investors never admit to being wrong about a company. They all think they're so smart and know everything. What a load of crap.
    watto_cobra
  • Reply 13 of 46
    gmgravytraingmgravytrain Posts: 708member
    Carl Icahn must be kicking himself, selling AAPL when it was somewhere in the $90 - $100 range. (IIRC)
    If he's not kicking himself, then haul his butt over to my foot and I'll be glad to oblige. Icahn said he knew Apple was going to lose it in China and maybe he was right, but there was no reason to dump all of his Apple stock and frighten investors. Well, he made his own bed and now he's tossing and turning and probably losing sleep in it. If he wants, he's welcome to buy back in now. Teehee.
    watto_cobra
  • Reply 14 of 46
    78Bandit78Bandit Posts: 190member

    Brand loyalty can only last for so long.  Back when I first got appliances for my house Kenmore was the brand to have.  Never mind that Sears manufactured nothing and just rebranded GE, Whirlpool, Frigidaire, etc. products with just a few changes to ensure only special parts fit.  Kenmore was a quality product and Sears stood behind it with parts and service availability for years.  People were just as loyal to Kenmore as they currently are to Apple.  Fast-forward 25 years and now you've got multiple stores selling appliances and nobody cares about Kenmore.  There is no brand loyalty, people buy whatever the neighbors are buying or whatever looks good on a commercial.

    Apple is going to have to innovate and introduce something in an entirely new product category to maintain its high-flying share price.  Just my personal observation, but I used to see the "rich kids" all having iPhones and now see a lot of Samsung devices mixed in.  Hardly any kids have iPads anymore as phones have completely replaced them for Facebook, Instagram, etc.  As these kids grow up, go to college, and get employed over the next 10 years I think Apple has a serious risk of becoming just another phone manufacturer without the brand cache currently associated with it.  Multiple other manufacturers will be just as good as Apple and a consumer who hasn't been locked into the Apple ecosystem won't have any compelling reason to choose it over something else.  Other manufacturers, particularly Samsung, are no longer perceived as "cheap".

    I'm sure Mr. Buffett has much more insight into the market than my observation which is obviously very limited, but I don't see the 8-20 year old age bracket building their lives around Apple products anywhere near as much as those that grew up earlier.  Apple had the best audio player ecosystem with the iPod and iTunes, perfected the Smart Phone with the iPhone, and did the same for tablets with the iPad.  Unfortunately Apple's feature and UI dominance pretty much stopped in 2014.  iPods are a distant memory, iTunes is fading fast in favor of unlimited streaming services, iPhones are a generation or more behind on many hardware features and have seen very limited OS improvements, and iPad sales have been tanking for three years.  Other products are just as good for those that are making their first technology purchase.

    The 21-35 year old generation is locked into believing Apple is the absolute best and it will be hard to change their mind much like quite a few 60+ year old people still swear by Kenmore.  Yes, some of them will buy their kids Apple products simply out of habit.  But at some point, without major innovation, Apple will become a company selling a commodity.  iPhone sales have plateaued since October 1, 2014.  If Apple doesn't see significant growth with the iPhone 8 I suspect we will be looking back on this period as the beginning of the transition of Apple from growth powerhouse to a mature company that will have to fight to maintain market share.

    As long as he has a significant investment in Apple I wouldn't expect to hear anything but praise for the company, but Mr.Buffett's expertise will be put to the test if he can recognize the point where Apple has peaked and it is time to start selling.  The first time we hear of Berkshire Hathaway selling 10% or more of its Apple investment it will trigger a bloodbath on Wall Street.

  • Reply 15 of 46
    B_TB_T Posts: 2member
    I wonder if Forrest Gump still has his AAPL stock. He will have made a killing, huh?
    edited May 2017 anantksundaramwatto_cobra
  • Reply 16 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    B_T said:
    I wonder if Forrest Gump still has his AAPL stock. He will have made a killing, huh?
    I understand Forrest is currently accidentally the third richest person in the world.
    watto_cobra
  • Reply 17 of 46
    lkrupplkrupp Posts: 6,396member
    78Bandit said:

    Brand loyalty can only last for so long...

    We’ve been harassed with your ilk’s prognostications for forty years now. It’s a broken clock. I still buy Craftsman tools so your point is moot.
    edited May 2017 anantksundaramwatto_cobra
  • Reply 18 of 46
    lkrupplkrupp Posts: 6,396member

    B_T said:
    I wonder if Forrest Gump still has his AAPL stock. He will have made a killing, huh?
    Lieutenant Dan took the money and put in some fruit company.
    watto_cobra
  • Reply 19 of 46
    rogifan_newrogifan_new Posts: 3,225member
    I don't like it when the stuff gets too high because then it gives Wall Street a reason to set urealistic expectations and then when Apple doesn't meet them they dump the stock. I'm sure iPhone super cycle stories will be ramping up and if Apple doesn't sell 80M phones in the holiday quarter it will be a disaster and Tim Cook is a failure blah blah blah.
  • Reply 20 of 46
    SpamSandwichSpamSandwich Posts: 29,881member
    $152.08!

    Amazing. And once tax reform hits, the roof is really going to get blown off stocks.
    edited May 2017
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