Warren Buffett Loads Up Apple Shares!
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Then when the DNA test came back, I found out he was not my grandpa, and that was devastating to me. Good day subscribers. Thank you so much for joining me today. I am Jeremy. This is the financial education channel and today we are talking about Warren Buffett is loading up on Apple shares.
Berkshire Hathaway, his company is buying Apple shares left and right guys, and we got to look at Apple and kind of say, Is this a really smart move? We know Buffett is doing very well on his Apple stake since he invested in them. That stock has gone up massively since he invested a little over close to two years ago, he started buying those guys.
He’s doing phenomenal on that. Now first, we just got to have a moment of silence here. Unfortunately, my boy, Mr. Warren Buffett, he’s down to number four in the net worth category for richest people in the world. And Zuckerberg is right behind him at number five, in that freaking jerk Zuckerberg, if he passes Warren Buffett.
I am going to be absolutely devastated. So watch out Zuckerberg, you better not pass them. So first off here, Warren Buffett’s company sold on almost a third of its remaining IBM shares in the third quarter. So they’re selling off this IBM stake the company sold nearly 32% of its remaining IBM shares to leave you with still has 37 million shares at the end of the quarter.
They’re trying to get out of that company as fast as possible here. Now, there’s lots of talk about how much has Warren Buffett lost on this at one point, and they were down over $2 billion on the IBM shares. I’ve seen a lot of figures out there about you know, how much is Warren Buffett down on that that IBM steak how much money has he lost that he’s been involved with it for like six or seven years or something like that.
I’ve seen amounts where he’s down, you know, several billion I’ve seen ones where he’s down like 817 million. I’ve seen ones where they’re, they’re saying he’s actually up on his steak, even though the share price is down. Just because he’s collected so much in dividends.
No one really knows if he’s really lost a lot of money on the IBM stake or done well because of dividends. And because we don’t know what the exact purchase prices he got each individual IBM share for so needless to say, net net, it’s a horrible investment for him because it was one of his biggest investments.
And you look at what if he had stuck that money, let’s say at Apple at that time, you know, six, seven years ago, he would be massively or a lot of different companies Google you could you would name a Facebook, any of those type of companies he would be absolutely massively on.
In IBM, maybe he’s going to eke out some kind of game there. But it’s not looking very good. So you gotta you got to take that into account. So with Apple here during the quarter, Berkshire picked up 4 million more Apple shares to give it 134 million shares in the iPhone maker. That’s a ridiculously huge stake there, guys.
We see her year to date, the Apple stock is up around 46%. It’s been an amazing year as far as the stock performance for Apple. And actually the underlying business has done amazing this year as well. Now, if we look here, it’s kind of the perfect Warren Buffett stock, you know.
This is a company that actually has a stronger growth in a typical buffet company, right? But we look at the forward PE here is that a 14 a 14 current p Okay. Then we look at dividend. You know, Warren Buffett loves his dividends. And we look here and they have about a one and a half percent yield, but they yield is going to be able to go up massively, that dividend ratio is going to be able to go up massively because they’re there.
The amount they’re paying out is so low, they’re paying out about 25% of the earnings in dividends, dividend companies in general to get to a place where they’re paying out about 50% to 75%. So Apple has ability to massively raise that dividend. Then we look at the balance sheet here. We know $20 billion in cash 53 billion in short term investments $194 billion in long term investments in almost pretty much all those numbers. I’m going to be going up massively over the next few years because Apple will just be more profitable and profitable. Why will they be more profitable?
Well, one, they’re buying back huge amounts of shares. But the main part is, is this company and by the way, share buybacks don’t help with profitability, they just help out as far as lifting up the ETFs as long as you can make just as much money the next year next year. But if we look here, iPhone 10 is at $999 product Okay.
I’ve said you guys many times in this channel already since before this product was launched. Within a couple years from now 80 to 90% of people that buy flagship smartphones are going to be paying 1000 plus dollars No matter if you’re an apple customer Samsung Google we see how much the Google Pixel came out at the second one here we see how much the.
Samsung Note which starts at what $909 So in we saw $999 here trust me guys within a few years from now, almost every single person that buys a new smartphone is going to be paying 1000 plus dollars for that smartphone. Okay, so this is gonna raise Apple’s ASP s per phone up massively because right now.
Apple ESP is or somewhere around which is average selling price of an iPhone somewhere around $685 when the majority of phones started selling, you know that 1000 plus dollars, you’re going to be looking at a company that’s going to go up to at least 800 or $900, ASP s, which is going to make their revenues and APS absolutely explode.
But if we look here just based upon their last quarter, right, which has absolutely nothing to do with iPhone 10, which is the the main flagship product Apple has launched now, this quarter has nothing to do with iPhone 10. And they still had revenue up 12% and epcs. Up 24% in the September quarter guys, that’s on real and one of the most exciting things about Apple right now is the way the services business is growing.
Okay? They brought in $8.5 billion in services revenue, just in this past q4, 2017. Right? That’s a 34% increase year on year, guys, the services category is already the second biggest business behind iPhone. But the way this business is growing, it is possible that one day not anytime soon.
We’re talking maybe five to 10 years from now that the services business could be the biggest business inside Apple, meaning they’re doing more in profit on the services category, then the iPhone category, we know they’re doing more in profit with services than any other thing. You know, whether you’re talking about .
Apple Watch, you’re talking about the air pods, you’re talking about iPads, if you’re talking about Mac’s, any of those businesses, we know services already the second, it’s still a long, long way from being there with iPhone, but I can definitely see a year you know, five to 10 years from now, when the services category is the most profitable business for Apple in by far, guys.
Now, if we look here, this is some news that came out. I’ve been talking about them doing this with friends for a long time, Apple could launch a video streaming service to rival Netflix. Okay, if we look here, Netflix last year did about $8.8 billion in revenue. This year, they’re probably do over $10 billion in revenue there.
But we look down there at the earnings per share only doing 43 cents of earnings per share, which means are basically barely profitable. Okay. So this is a huge business. If Apple can launch a streaming services I’ve been talking about for years with friends.
I’m like, why do they not get into the video streaming service, they got more money than anybody they can, they can buy more content than anybody out there they can then they can just take losses with that, run out the competition. And then they’ve got the whole category in a monopoly state.
And we know it’s so much easier for Apple to do this category by category when they’re the ones who run the main device that does everything, right. So it’s a huge thing. And I think if you’re a Netflix, shareholder, you’ve got to be very scared of this.
You’ve got to be and I know, people will say, well, Netflix are so dominant in their category. They’re so dominant. And I’m like, yeah, that happens with so many companies. How many companies has Apple killed off over the years that were dominant companies that were the dominant companies in their time, right?
And then we look back and we’re like, oh, no, that company wasn’t dominant. Yes, they were dominant 100% we look at Nokia they were by far and away the dominant phone maker in the world. Whereas Nokia nowadays guys, I don’t I don’t know person that has bought a Nokia phone within the last I don’t know five plus years.
Guys, what the heck Pandora, we look at that company, right? Since Apple Music came out though, which is a straight competitor to Pandora. And and Apple radio came out, right? Pandora is down about 74%. Since then, guys, if we look at Fitbit, right, Fitbit is dominant in the wearables game, then Apple Watch comes out.
And since that time, fitbits, down somewhere around 81%. Okay, remember, BlackBerry, Blackberry was a dominant phone maker at the time when iPhone launched right. Shares of the Canadian maker of blackberry phones peaked in August 2007. By the way, the iPhone was launched in 2007. There were two other $236 a share.
Blackberry currently has a $10 share price, guys. So we’ve seen and we can go back to the record companies Apple knocked off, we can talk about all these different ones and CD players and all that stuff. We could talk about all the old school stuff, I’m just talking about ones that are more recent, within the last five to 10 years.
Apple is almost impossible to compete with, they almost always beat whoever they want to compete with, in whatever space they want to compete with. Just because they just do a better damn job at marketing the products, they come out with very good products. They know how to market those products, like no one else.
And then they got so much money nowadays that they can kind of like, outbid you, basically. And what do I mean by that? I mean, if you are, let’s say you were a smartphone maker, and you can only afford 1000 engineers, Apple can afford 5000 engineers, okay, and pay him all more than yours and make sure they’re better quality of candidates, right?
Same thing with you know, you look at this whole deal with you know, possibly getting into the Netflix game, when Apple and Netflix are gonna be going to bid for a show or a movie or whatnot to have on their service. Who do you think’s gonna win every single time Apple is going to win every single time they’ve got the bigger bankroll when you have the bigger bankroll things get a lot easier for you.
And it’s not even a it’s not even a close comparison between who’s got a bigger bankroll Netflix or Apple here, guys. So when I look at all this, I just think it’s very interesting. I think Apple’s just in a great position over the next few years, with profits going to explode even more with obviously revenues should rise substantially with ASP is in iPhones going up with the way services revenues going up.
If they can be successful, which they probably will, if they do it, if they can be successful in the video services category, that’s going to be a monster category for them in probably a straight profit engine starting three to five years from now. So you know, Warren Buffett, how is he going to do with this position.
He’s going to do unbelievably well with this position, because not just because the share price should appreciate over the coming years, but because the dividends will increase and increase in getting much, much bigger Apple will start raising dividends every single year and he gets those dividends every quarter.
If he’s getting, you know, $10 million in dividends this past year, they’ll probably get 20 million the next year and then 40 million 60 million so the numbers really start to add up. So Buffett in that game should do phenomenal with that investment.
I hope you guys enjoyed this today to talk a little bit about Apple stock, hit a thumbs up if you did leave me a comment if you got anything to say about this. I would love to hear from you guys. Thank you for watching and have a great day.