Almost 50% of Warren Buffett’s Berkshire Hathaway’s $369 billion portfolio is invested in just one stock.

berkshire hathawayhas exposure to a variety of industries including insurance, rail, and energy, and also owns a large public equity portfolio. Individual investors scan this list of holdings to find potential opportunities.

it’s hard to ignore it apple (AAPL -0.90%) accounts for almost half of Portfolio led by Warren Buffett. The investment has been so successful that the iPhone maker’s stock has risen about 640% since early 2016, when Berkshire Hathaway first started buying shares.

Investors can gain insight by understanding the characteristics that first intrigued Buffett about Apple. And we can draw conclusions about this top by looking at the current situation from a long-term perspective. FAANG stocksInvesting now has benefits.

Decided to purchase without hesitation

Berkshire Hathaway’s portfolio includes well-known companies such as: american express, coca colaand Kraft Heinz. What these companies have in common is a strong brand. This has long been Apple’s key competitive advantage and differentiator, and is something Buffett probably noticed when he started buying his stock.

The consumer electronics industry is generally a difficult industry to achieve lasting success due to intense competition and price pressure. Apple is unique in its ability to counter this trend and exert pricing power. The company sells its hardware products at premium prices, and consumers have shown they are willing to pay.This is why Apple gross profit The average over the past five years was 41%.

From Steve Jobs to Tim Cook, past and present leaders have done a great job of keeping Apple’s brand strong. I think this gives Mr. Buffett confidence that this business will be dominant in the future.

The Oracle of Omaha, better known as Buffett, was certainly impressed by Apple’s financial situation. This is he one of the most profitable companies on the planet. The company’s operating margin has consistently exceeded 24% in each of the past 10 fiscal years.and the company’s return on invested capital 56.9% indicates a financially exceptional business.

Before investing in a stock, Buffett wants to determine whether a company’s earnings will increase significantly in the future. From fiscal year 2016 to fiscal year 2023, Apple’s net income increased at an average annual rate of 14.7%. Based on this track record, it’s hard to imagine a scenario where earnings don’t continue to grow in the coming years.

And perhaps the most important factor in Buffett’s decision to add this tech stock to Berkshire’s portfolio was its ridiculously cheap valuation. In the first quarter of 2016, Apple stock traded at an average price-to-earnings ratio (PER) of 10.6. Based on brand recognition and strong financials, this valuation made this stock an easy buy at the time. That’s why Buffett jumped at the opportunity.

Apple in the next 10 years

Before you rush to add Apple to your portfolio, we recommend looking at this business in a new light. Ultimately, investors need to see whether Apple can outperform the market. S&P500 When you turn your attention to Next Ten years.

To be honest, I’m not confident in this result. One reason is the company’s slowing growth. Apple recorded a 2.8% revenue decline in its 2023 fiscal year. Slower economic conditions are a contributing factor, but this may also indicate that the business is at a much more mature stage in its lifecycle.

I think the current rating is also high. The current P/E ratio is about 32 times, which is about three times what it was when Buffett first acquired it.

My view that the stock is likely to underperform the broader index going forward could prove to be demonstrably wrong. However, given the current situation, Apple doesn’t seem like a wise investment for long-term investors.