Apple Goes Past A Trillion, Berkshire Blows It Out, and More Tariff Tiffs!
"Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant." Warren Buffet
Warren Buffet invested in Apple a few months ago. This week, that investment earned him a cool 3 billion after Apple reported great numbers on Tuesday afternoon. What’s new, right? The guy has been a great investor for half a century, it is not surprising he got the Apple call right. Additionally, Buffet's Berkshire Hathaway posted operating profits of nearly 7 billion in the last quarter, a nearly 70% increase. I read the funny quotes and see how well Buffet’s entity is doing and wonder what can be gleaned from his excellence in the investing and business domains?
First, from an investment perspective, when Warren and Charlie identify something they want to own, they are not timid or bashful. Forget about pounding the table, they break the table by buying in massive size. Whatever he can put into it, he does. In this case, they saw Apple’s cash hoard, a massive buyback, an expanding product line and services business, the stickiness of the ecosystem, and dominance of the phone at the high end. Wall Street didn’t think much of Apple and Warren and Charlie didn’t give a whit. 3 billion bones later (and probably more coming), who gets the last laugh? The lesson is if you know what you want, you go big and keep going big. If you are right, you win big.
Second, both Buffet and Apple understand that growing company earnings power is what a management must accomplish. By earning more money each quarter and year, the stockholders ultimately benefit. There are thousands of listed companies across the globe and management teams all want to be hailed as geniuses who have led their shareholders to the promised land. Most executives do not accomplish that lofty endeavor but many get paid like they have. Sifting through the rhetoric to find people who can accomplish the tricky feat of systematically improving company earnings power is a big piece of the investment puzzle.
Third, over the course of a fifty year career, Mr. Buffet has endured many temporary obstacles with the businesses he bought. With Dexter shoe company, he traded away millions of Berkshire equity for it and the business wound up worthless. General Re and Geico had to be turned around, and in the case of Geico, management was replaced along with capital infused. US Air and Solomon Brothers were both on the brink of bankruptcy. The key point is he had great businesses like See’s Candy which could sustain companies that had problems while ultimately he put people in who place who could fix the problems. As an investor, you are going to own things that aren’t doing well. You don’t have the power to change the management, but you can judge whether or not you think the management teams will turn the business around.
Next week will be a big week for earnings and I am sure you will be watching, as will I.
Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation. The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantee performance better than market indexes.