“I know about as much about semiconductors or integrated circuits as I do of the mating habits of the chrzaszcz,” Buffett once wrote (“chrzaszcz” is a Polish word for beetle). “We will not go into businesses where technology which is way over my head is crucial to the investment decision.”
Buffett has almost always stuck with what he knows — investing in everything from soda to carpets, furniture and razors. The approach has helped make him America’s most famous investor.
“To Buffett, computers were just tunnels that enabled him to reach other people who could play bridge,” wrote author Alice Schroeder in “The Snowball,” her biography of the investor. “Buffett had a long-standing bias against technology investments, which he felt had no margin of safety.”
The Apple investment appears especially curious given that Buffett’s only prior tech investment, IBM, hasn’t fared well so far. The stock’s performance has trailed U.S. markets the past five years.
But much has changed since Buffett first invested in household names such as Coca-Cola and Geico. Now Buffett is 85, and his apparent successors at Berkshire Hathaway, Todd Combs and Ted Weschler, wait in the wings. The duo invest independently, so a tech company that makes semiconductors, such as Apple, is fair game.
After the news broke of the investment, Buffett told the Wall Street Journal that either Combs or Weschler made the investment.
For David Kass, a University of Maryland business school professor who writes frequently on Buffett, that makes sense given that the size of the deal, roughly $1 billion, is the amount that Combs and Weschler typically invest. Buffett himself generally invests in the $10 billion range.
Apple stock has also plummeted recently, making it a possible target for investors hunting for discounted stocks.
“I certainly did not expect this investment,” Kass said. “But from a value investor point of view it makes some sense.”
Apple also is a fit for Berkshire Hathaway given the company’s sheer size. With more than $100 billion in assets, it doesn’t make sense for Berkshire Hathaway to invest in small companies.
“He has the burden of cash coming in all the time,” said Roger Lowenstein, author of “Buffett: The Making of an American Capitalist.” “There’s a relatively small pond of companies that are big enough for Berkshire to make a difference in.”