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Buffett won’t buy tech stocks with mediocre fundamentals & speculative upside because he doesn’t understand tech enough to predict. I don’t understand how Apple is any different. Sure, has great fundamentals, but has unpredictable downside - in tech, moat can disappear overnight.
It seems to me like he might be blinded by incredible fundamentals and may not be conscious of the implied technology prediction, which he himself has said he isn’t qualified to make. What am I missing? ¯\_(ツ)_/¯
I agree. And that’s the judgement error.
Don’t think you are missing anything but maybe think about Apple as a consumer company (tech enabled) and not strictly tech. @profgalloway wrote a great book detailing this and I think about Apple a bit differently.
Extending the analogy, Buffett may think of Apple as a retail / consumer company and believes he can predict it better. I don’t know how he thinks about it, but I am guessing that is how he thinks about it. Also they return capital and he has so much he’s looking for yield.
Buffett enters into cash rich company which is @ point of returning cash to shareholder through high dividends / buybacks , then he will exit cash generation dips .. like he did earlier with IBM , GE and now Apple .
He’s evaluating it as a lifestyle brand and guessing that the real edge Apple has is that people identify with the products a lot and that they have carved out a high end niche. As such th bet is not much different than that [insert premium brand] will continue being premium
challenge obviously is that for something to be a premium brand is a lacking indicator on technology. Hard to see if Apple is ahead tech wise and if it’s not the brand premium will only disappear in a few years. Hard to say if they can stay premium with middle of the road tech
1. Apple is becoming a services and subscription company. 2. Premium priced hardware so they'll never be in a race to the bottom. 3. Very strong management and capital allocation/optionality (ref The Outsiders by @BillThorndike). 4. Incredible brand recognition. 5. "Cheap"
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