Berkshire Hathaway Inc. , run by legendary billionaire investor Warren Buffett, disclosed holding an equity portfolio valued at $128.6 billion at the end of the first quarter of 2016. The filing showed that the investor started only one new position during January-March period, while reducing stakes in four companies. Technology stocks represent 12% of Berkshire’s total portfolio. In this article, we’ll discuss Buffett’s three favorite tech stocks including Apple Inc. , International Business Machines Corp. , and Wal-Mart Stores, Inc. .
Buffett is betting big on Apple Inc. , in which another billionaire investor Carl Icahn dumped his entire stake over China concerns. During the first quarter, Buffett opened a new position in the iPhone maker, owning around 9.8 million shares. Bloomberg reported that Berkshire Hathaway paid $99.49 per share, on average, for Apple’s shares. The investor purchased 9.81 million shares through March 14 for about $976 million. Buffett’s move in Apple seems interesting as investor seems to be worried about the company’s growth.
Apple reported its first-ever quarterly decline in iPhone sales and first revenue drop in 13 years in April. For the second quarter of fiscal year 2016, the company’s revenue declined since 2003 to $50.6 billion revenue, compared to $58 billion a year ago. The iPhone maker posted a quarterly profit of $10.5 billion, versus $13.6 billion last year. Apple sold 51.2 million iPhones during the second quarter, down from 61.2 million in the same period a year ago. Sales dropped by more than a quarter in China, the company’s most important market. Recently, analysts at JPMorgan cut their price target on the company’s shares to $105 from $125.
Apple is facing a lawsuit in China for stealing design for iPhone 6. Shenzhen-based Baili has sued the U.S. tech giant for infringing the patent right of its smartphone. After a court ruling, Beijing Intellectual Property Office ordered the U.S. tech giant to stop selling its iPhone 6 and iPhone 6 Plus in the country. This was a surprising decision for the iPhone maker, which quickly made an appeal to a higher court. After the appeal company will be allowed to continue selling the iPhone 6 line until the court ruling. Credit Suisse believes that the iPhone 8 is likely to overshadow the company’s upcoming iPhone 7.
The firm’s analyst Kulbinder Garcha said in a note that the iPhone 7 will prove to be a modest upgrade. He said the iPhone 8 would have significant innovations, and investor should buy Apple for the iPhone 8 “super cycle,” which could drive the company’s stock price more than 50% higher.
Apple’s stock has lost 11.17% year-to-date.
International Business Machines
Buffett increased his position in International Business Machines Corp. (NYSE:IBM) by 198,853 to more than 81 million shares, worth $12.3 billion. IBM is a well-established firm, operating in the technology industry. The firm, which is based in Armonk, has invented many internationally used devices, such as the automated teller machine (ATM), the floppy disk & the magnetic stripe card. In 2012, IBM was ranked by Fortune as the 2nd largest US firm in terms of number of workers and the 4th largest US firm based on market capitalization.
IBM is working with Local Motors on the first public self-driving vehicle dubbed Olli. The electric bus, which can carry up to 12 people, is equipped with advanced technology, including IBM Watson Internet of Things (IoT) for Automotive. The bus will be used on public roads locally in DC and late in 2016 in Miami-Dade County and Las Vegas. IBM’s shares have gained 3.33% during the last three months.
Buffett also likes Wal-Mart Stores, Inc. (NYSE:WMT), which is re-imagining its future. The investor trimmed his stake in the world’s biggest retailer to 55.24 million, worth $3.8 billion, during the last quarter. Wal-Mart is looking for up to $60 million in sales over the next three years. The retailer expects $45 billion to $60 billion in sales by 2019.
The retailer plans to expand its online presence. It will improve online shopping system, fast delivery service, and user-friendly apps and website. “We have the opportunity to reimagine retail again,” President and CEO Doug McMillons said at the 46th annual shareholders meeting. In addition to exploring opportunities in China, Wal-Mart is also improving its shipping and delivery network to compete with Amazon. The retailer plans to test grocery home delivery service with ride-sharing services Uber, Lyft and Deliv. The company is also testing drones to manage inventory at its large warehouses. The retailer is developing pickup or delivery capabilities in 11 countries. In China, the company is moving aggressively with pickup and delivery.
Wal-Mart’s shares have been performing well this year, gaining nearly 6% during the past three months. The stock has soared 15.03% year-to-date.