40.3% of Warren Buffett’s $336 Billion Portfolio Is Invested in Apple. Should You Buy the Stock, Too?

Warren Buffett usually doesn’t bet the farm on any one stock. Most of the 40 or so stocks in his Berkshire Hathaway portfolio make up less than 1% of the conglomerate’s total equity investments.

However, Apple (AAPL 5.98%) is a notable exception. A whopping 40.3% of Buffett’s $336 billion portfolio was invested in the iPhone maker as of March 31 — even after Buffett and his team trimmed their position. Should you buy Apple stock, too?

Why Buffett loves Apple so much

To understand why Buffett loves Apple so much, it’s helpful to remember what he wrote to Berkshire Hathaway shareholders last year. The legendary investor said he and his longtime business partner, the late Charlie Munger, were business-pickers rather than stock-pickers.

Buffett holds Apple’s business in high regard. At Berkshire’s annual shareholder meeting in 2023, he said, “Apple happens to be a better business than any we own.” That says a lot, considering Berkshire owns great businesses like BNSF, Geico, and See’s Candies.

Apple CEO Tim Cook enjoys strong support from Buffett. He told CNBC last year, “Tim Cook is one of the classiest CEOs, and he understands the business.” Buffett noted that Apple co-founder Steve Jobs “basically invented” the iPhone, but Cook “has managed that company in an extraordinary way.”

Sure, Berkshire trimmed its position in Apple a little in the first quarter. Buffett said at the company’s annual meeting Saturday that Apple is still “extremely likely” to remain its largest holding.

Should you buy Apple stock, too?

Apple has a couple of strikes against it, in my view. First, its revenue growth has been weak or nonexistent. In Apple’s fiscal 2024 second quarter, the company’s sales fell 4% year over year. Second, the stock’s valuation is expensive in light of that meager growth. Apple’s shares currently trade at more than 26 times forward earnings.

So, am I deadset against buying the stock? Nope. I agree with Buffett that the company has a wonderful business. Apple is the biggest individual stock holding in my portfolio, too.

I also think the company’s Worldwide Developers’ Conference (WWDC) in June will provide a nice catalyst for the stock. Apple is widely expected to introduce multiple artificial intelligence (AI) products at the WWDC, with a special focus on generative AI.

Most of the attention so far with generative AI has been on cloud-based applications. However, there is a huge opportunity for edge AI — the deployment of AI apps on devices. With an installed base of over 2.2 billion devices, Apple could dominate the edge AI market.

I won’t be surprised if Apple’s new AI offerings spark a “super-cycle” in iPhone upgrades over the next couple of years. As iPhone revenue goes, so goes Apple.

One cautionary note

There’s one cautionary note I’d be remiss if I didn’t bring up. I don’t think it’s wise to copy Buffett in every respect concerning Apple. In particular, most investors shouldn’t put 40.3% of their portfolio (or anywhere close to that level) in only one stock.

Buffett once said, “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” However, the reality is that most investors (including yours truly) are ignorant. We don’t know all we need to know to bet the farm on an individual stock, even one as great as Apple.

I think all of Buffett’s reasons for loving Apple are good. But spread your love across more stocks in multiple industries. That way, you’ll reduce the chances of losing the farm.