Apple’s Shares on the Rise after $1 Billion Investment – What Other Companies Could Benefit?
New York, New York – Shares of Apple Inc. spiked 3.71 percent to close at $93.88 a share last Monday after it was disclosed Warren Buffett’s Berkshire Hathaway Inc. has taken a stake worth approximately $1.0 billion in the tech giant. The conglomerate, which is run by Buffet, purchased 9.81 million shares of Apple at an average price of about $109 a share, according to a recent regulatory filing.
“It signals a change in the kind of company Apple is,” Gene Munster, an analyst at Piper Jaffray, said to the Financial Times. “There are new investors — it used to be growth and high-risk investors, now it’s more value and return on capital.”
Access our free in-depth equity report on Apple here.Shares of Apple fell sharply last month after the company reported its first quarterly revenue decline in over a decade. Apple reported revenues were $50.55 billion for the second quarter of fiscal 2016, which was a decrease of 13.0 percent year-over-year and short of analysts’ estimates of $51.97 billion. The vote of confidence from Buffet’s Berkshire Hathaway is a big win for the company after activist investor Carl Icahn and David Tepper’s Appaloosa Management recently sold their stakes in the company.
According to Market Watch, Apple’s returns on invested capital (ROIC) was 27.5 percent for its fiscal second quarter, which ranked it 13th “among the 228 companies in the S&P 1500’s technology sector”. At the close of trading on Friday, May 13th, Apple shares were trading at 10.9 times consensus earnings estimates for 2016, which was down from 14.4 times a year ago.
Berkshire also boosted its holdings in Visa Inc. (NYSE: V), International Business Machines, Phillips 66 and Bank of New York Mellon. The conglomerate also reduced its holdings in Procter & Gamble, MasterCard and Wal-Mart Stores, while dissolving its stake in AT&T.
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