Buffett's Berkshire invested $1 billion in Apple

By Jonathan Stempel

REUTERS - Warren Buffett's Berkshire Hathaway Inc revealed a more than $1 billion stake in Apple Inc, a rare foray into the technology sector that the billionaire has largely shunned, apart from a poorly performing investment in IBM.

Shares of Apple got a boost from the Berkshire imprimatur, rising more than 3 percent on Monday. Berkshire made its investment in the first quarter, before the iPhone maker in April reported its first quarterly revenue decline in 13 years.

The investment came despite the increasing view among investors that Apple may deserve a lower valuation because its heady growth days may be over, though Berkshire has long favored companies with strong balance sheets and management.

In a regulatory filing detailing most of its stock holdings, Berkshire said it held 9.81 million Apple shares worth $1.07 billion as of March 31.

The value has since fallen into the low $900 million range. Berkshire's largest technology bet has been Buffett's $12 billion stake in International Business Machines Corp.

Apple stock "is stunningly cheap, and it has a massive pile of cash," said Steve Wallman, founder of Wallman Investment Counsel in Middleton, Wisconsin, who has owned Berkshire since 1982 and Apple since 2003. "Apple is not getting credit for research and development it is doing behind the scenes."

An Apple spokeswoman did not immediately respond to requests for comment. In afternoon trading, Apple shares were up $3.20, or 3.5 percent, at $93.72.

APPLE FALLS

Buffett did not make the Apple investment himself, his assistant confirmed in an email to The Wall Street Journal, meaning that it was made by one of his stockpicking deputies, Todd Combs and Ted Weschler.

They each invest about $9 billion and usually make smaller wagers, while Buffett makes Berkshire's bigger investments.

Investors said Combs may have been the Apple buyer. He invested in chipmaker Intel Corp for Berkshire in 2011.

Buffett's assistant did not immediately respond to a request for comment.

Before Monday, shares of Apple had fallen by one-third from their April 2015 peak. Last week, the company's market value fell below that of Google parent Alphabet Inc, despite Apple's having roughly three times more revenue and profit.

In April, Apple reported its first quarterly decline in revenue in 13 years as an increasingly saturated market hurt iPhone sales.

Chief Executive Tim Cook is looking to develop other technologies for the Cupertino, California-based company, and last week unveiled a $1 billion investment in Chinese ride-hailing service Didi Chuxing.

Berkshire's investment also puts it at odds with investors that have retrenched from Apple.

Last month, billionaire Carl Icahn said he sold his Apple stake on concern about the company's relationship with China.

David Tepper's Appaloosa LP sold its stake in the first quarter, and Ray Dalio's Bridgewater Associates cut its stake by two-thirds. Leon Cooperman's Omega Advisors also shed its Apple stake, a person familiar with the matter said.

YAHOO

Despite his aversion to technology sector, Buffett told CNBC on Monday, he offered to help Dan Gilbert, the chairman of Quicken Loans and owner of the Cleveland Cavaliers basketball team, finance a bid for Internet company Yahoo Inc.

Reuters first reported Buffett's involvement on Friday.

While Buffett told CNBC he would not be an equity partner, he could collect dividends or interest on the financing, and perhaps take an equity stake later.

"Buffett has always restricted himself from investing in things he doesn't know or understand, and staying within his circle of confidence," said Richard Cook, co-founder of Cook & Bynum Capital Management LLC in Birmingham, Alabama, which invests 8 percent of the $350 million it manages in Berkshire.

The Apple investment may have been made with proceeds from the sale of AT&T Inc stock, as Berkshire exited what had been a $1.6 billion stake.

In Monday's filing, Berkshire also reported higher stakes in IBM, Bank of New York Mellon Corp, Deere & Co and Visa Inc, and lower stakes in MasterCard Inc and Wal-Mart Stores Inc.

(Reporting by Jonathan Stempel in New York; Additional reporting by Jennifer Ablan in New York and Ross Kerber in Boston; Editing by Lisa Von Ahn and Steve Orlofsky)