EVERYTHING Warren Buffett & Charlie Munger EVER said on Apple Inc. (AAPL)

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EVERYTHING Warren Buffett & Charlie Munger EVER said on Apple Inc. (AAPL)

A compilation of quotes from Warren Buffett and Charlie Munger about Apple Inc. (NASDAQ:AAPL) – now one of their largest holdings. See video and some text below

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00:00I felt that Apple has an extraordinary00:06consumer franchise apples a different00:09kind of business then IBM they're both00:11tech obviously in a major way and they00:13even have a joint venture you know on00:15some things but but but I think I00:18understand consumer behavior perhaps00:21better than I do00:23the tech business wouldn't take much to00:25beat it and I liked it I liked Tim Cook00:28very much I liked their policies I I see00:34how strong that echo system is to an00:37extraordinary degree I mean I look at my00:40my grandchildren my great-grandchildren00:43and everybody in the office I mean that00:45their families I talked to the people00:48the Furniture Mart when the 10 hadn't00:51arrived nobody goes over to the you know00:55buy it buy that Android I mean it it's00:58you were very very very locked in Italy01:03psychologically and mentally do the the01:06product you're using I mean you got your01:08all kinds of stuff up on there it is01:10it's a very sticky product is a good01:22take his grandchildren's tablets away0

1:24and he did market research I do think we01:30keep learning and more important we keep01:33we don't unlearn the old tricks but the01:36young man make some contributions they01:38cause us to think about things who01:39wouldn't have thought about before we01:41would not have bought the airlines or01:42the or the Apple if the young man hadn't01:48come up with the idea and but once they01:51did Warren01:54Anwar was pretty great was hard to buy01:56that much your life stuck I said it must01:58be awkward conversation with Bill Gates02:00after that Apple is coming back I don't02:03know if X does not have any illusions02:09Bill Gates 150 million dollars will help

02:13I think they sold it one of your new02:26holdings Apple one of your big holdings02:28just came out with its earnings this02:29week and the initial reaction from Wall02:33Street was to sell off the stock a02:34little bit because of disappointing02:36numbers of iPhone sales is it safe to02:37assume that you still don't own an02:39iPhone safety you can put that you don't02:43have to ask me that again for another02:44five years I've got it I got a very very02:47effective flip phone although I don't02:48have it on me what did you think of02:50Apple's earnings well it's about what I02:53expect but I don't make me I don't own02:56it because of what I think the earnings02:57are gonna be in the next three months or03:00six months I it's very hard to figure03:03out how much people delayed their buying03:05of iPhones because of the launch of a03:09new one in six months I I've talked to03:11her guys at the Furniture Mart and they03:13say there's a lot of that but but a lot03:16of people waiting a lot of a boy yeah03:17yeah

I mean if you knew a new car was03:21coming out tomorrow a new model of03:23something or other and you had to pay03:25the same roughly the same I don't know03:28whether consultant but close to the same03:29for that last year model yeah you're03:31probably gonna wait I mean that so I I03:34think I think it's an incredible03:36consumer product they also have a cash03:40wart of over a quarter of trillion03:42dollars all right jealous I'm very03:44jealous I mean yeah I thought it was03:47really okay until I look at their03:49balance sheet on the other end we've got03:50our here in the United States what would03:53you like to see Apple do with that cash03:55hoard

I love the fact they've repurchase03:58shares not what they're doing now is03:59borrowing money the United States04:00figuring they've got that money back at04:02some point or another and so they're04:03they're really buying04:05buying buying in their stock using04:08borrowed money but with the knowledge04:09that if they had to they could take it04:11back now and pay every big repatriation04:14tax but what they probably hope that04:17that tax comes down and my guess is that04:20some Pointer of that money will not go04:21back in the United States or most of it04:23and I I like buying a if I like buying04:26the stock myself I like the company04:28buying unit I obviously think that you04:31know that it's a good buy and if you buy04:34your own stock there's there's no04:35company you should understand better04:36than your own company04:37and I think mine and stock makes a lot04:39of sense at one price and I don't think04:41it I think it does not make sense at04:42another price I think it should be price04:43sensitive most companies don't look at04:45it that way but but that's the way I04:47look at this train has left the station04:49it likes to so frequently point out how04:52come you don't feel that way about04:53shares of Apple how come you feel like04:55that's a different story the shares

when04:57we bought them at least were much more04:59reasonable analyzing Koerner and he's05:01Apple didn't have to do a lot better in05:03the future than they were doing at the05:05current time when you get into a Google05:08and Amazon you're paying for the future05:10more but that may they may well happen05:13without a future I mean that may be more05:14than justified an apple I wouldn't say05:17it's easier for me to understand that05:18Google now perhaps or Amazon now05:22certainly would have been five years ago05:25it's amazing where while we're yeah05:28apples ended up with consumers I mean I05:30I can very easily determine the05:34competitive position of Apple

now and05:37and who's trying to chase them and how05:40easy it is to chase them we happen to be05:43well situated in terms of having these05:45masses on furnishing stores and and I05:49can learn very easily how consumers05:53react to different things they're05:55probably easier than I can trying to I05:59got what's really happening at Amazon at06:01any given time so you use your research06:03at the Nebraska Furniture Mart to to06:06tell you that consumers prefer Apple06:08over Samsung or I mean what what type of06:10thing are you well the interesting thing06:11is if you're coming in to buy a TV set06:13the Furniture Mart a price is extremely06:16important now06:18pictures but there's all those great06:20pictures just setting up there so you06:22you're gonna have Samsung you know all06:24these different ones and if you put on a06:27sale and you drop the price of Samsung06:31ten percent we can fill that department06:34with people to come out for it06:35you can't move people by price in the06:39smartphone market remotely like you can06:42move them in appliances or all kinds of06:45things people want the product they06:48don't want the cheapest product and the06:51loyalty is huge now that doesn't mean06:54somebody can't come along with a product06:56that just jumps the field in some way06:58but and then once you have the product07:02the degree to which it sort of controls07:04

your life I mean it's a very very very07:06valuable product to the people that07:08build their lives around it and that's07:10true of eight year olds and Stroeve 8007:12year olds people who have questioned07:15Apple's future have said things like07:17well right now people are paying $80007:19for a smartphone and the other reality07:22and technology is that prices eventually07:24come down and unless you're adding more07:27and more value to that product the price07:28will come down so what happens if people07:31I mean I guess the question is what07:33people always be willing to pay $800 or07:35more for a phone or will that wind up07:37being a cost that comes down and down it07:40can be that way but usually because07:42there's competition between different07:44products and some manufacturer decides07:47that they can't beat say Apple on their07:49own terms so they drop a hundred bucks07:51or 200 bucks some products are very07:54susceptible to that and other products07:56are not and so far I mean had smart08:01phones and big differences in price08:03categories and and people come back in08:06and if they had an Apple before you're08:09gonna have a much cheaper cell phone08:12selling right next to a smart phone08:14selling right next to it

and they don't08:16look at it if you have a cheaper TV the08:20pictures looking at you and say what boy08:22I said what's the difference man and you08:24buy the cheaper TV and that's true I08:26mean most items are price sensitive and08:28it's not to say that08:31pineapple isn't has somewhat pricing08:33theory it's very very very little that08:36but somebody could come wrong and08:38leapfrog something in the way the08:39technology adds some benefits that that08:44would be the more competitive threat to08:45me than price competition it would be08:47benefit competition yeah I don't know08:49what that is but then you know Apple08:51gave me a whole lot of things that I08:52never realized I need and somebody else08:55

is trying to think of some others that08:56used to get me a log to say mine just08:58the stock price again you said that it08:59made sense to you when you started09:01buying into it shares have appreciated09:04so that's that problem yeah there's09:10always an anchoring problem with but I09:12used to buy him attacks it's harder to09:14buy them at higher prices so does that09:17signify that you've stopped buying an09:19apple because of where price is well09:20maybe maybe not I guess when you see09:30things like the earnings that came out09:31you had mentioned to us the other day09:32that you weren't bothered or09:33disappointed by the earnings when you09:35see your stock price pulled back you let09:37you probably like it at that point09:38oh yeah I mean Apple with a non new09:43product I think they sold something like09:4450 million that's a lot of units to sell09:47of something at seven hundred dollars09:48and a lot of those are going to people09:51but we're actually replacing a present09:53

Apple but they do know that a new09:57products gonna be out in six months or09:58something and and you know who knows10:02maybe they got promised an Apple for10:04their birthday or the graduation but I10:07would be tempted if I were going to buy10:09one to wait when the model comes out but10:12what do I lose by doing it except the10:14use of one in between it's a lot of10:16product to sell well with a new models10:19coming out what you think about is you10:20know you never if you pay big prices for10:23something you're counting on earnings10:25you're kind of not being right a very10:27high percentage of the time on our10:29projections of earnings that go up and10:32of course the best con earnings are the10:34ones that go up without more capital10:35investment very easy to have great10:38earnings in the utility business you10:39just put a slug of money you got a10:41return out of the return isn't that10:42great10:42so you really look10:44for something that will grow and and I10:48did mention one thing at the meeting10:50which I don't think people appreciate at10:52all a

s if you take say the five largest10:55businesses in the country by market10:58value10:58you're probably and assuming Berkshire11:00isn't in there to flips it and flip11:02South let's assume we're out those five11:04businesses have a market value of two11:06and a half trillion or more you know11:08starting with Apple you could run those11:11five businesses with no equity capital11:14so you have close to 10% of the market11:18value perhaps of the United States and11:20five extremely good businesses that11:23essentially take no capital now that was11:26not the case in the past I mean if you11:28were at the turn of the century knew how11:30about US Steel and the big railroads and11:33all that you made large sums of rocker11:36follow up with the oil business by11:38earning money with refineries or steel11:42mills and finally earned enough so that11:44you bought another one and you borrowed11:46some money along the way but you had to11:47build up equity capital dramatically as11:49you went along and even if you go back11:51to the fortune 500 of 30 years ago the11:55companies that that were big took big11:57capital now it you've got the five12:01highest valued companies in the country12:03they don't take any capital even IBM has12:07net no tangible assets and if you take12:10the equity the app equity subtract the12:13intangible assets it's less than zero12:15and if you take businesses you know you12:18take a good one I mean they may they may12:21invest some money in fixed assets all12:24but they actually need no equity capital12:26so you could have it's two and a half12:28trillion dollar business in the United12:29States and not need equity capital and12:31that is a different world in the past

12:34you over the years over the last ten or12:37fifteen years have become a much more12:39industrialized companies things like the12:41railroads that do require more capital12:43equipment more capital investment when12:45did you notice that the top five market12:48ship market cap companies required no12:50capital investment where did you make12:52this realization and does that explain12:53your investment in Apple12:55it doesn't if you find it they12:57understood that for a long time but it's12:59become more and more concentrated used13:01to be ExxonMobil up there and some so13:03the shift has been taking place and13:05essentially the great great great13:09businesses have become businesses that13:12don't take capital on and that really13:13wasn't true I'm in the auto industry13:14took a lot of capital the aerospace13:16industry took a lot of capital the13:17railroad industry these are huge13:18industries and affected America I mean13:21they changed our country

now you've got13:23companies that have huge market values13:25changing the country they don't take any13:28money13:28those companies for the way but for13:30people who are listening on radio we did13:32just show a chart of that but are a full13:34screen of it it's Apple Microsoft Amazon13:36Google and who am i leaving out and13:40Facebook great and Facebook those are13:42the five and alphabet obviously the13:44parent company of Google that's that's a13:48huge shift those are the wonderful13:50business know the businesses the role13:52and don't require money and of course13:54that's why there are a wash in cash and13:56to the extent they made it abroad some13:58of it they'd have to pay some tax if14:00they brought it back now they use some14:02capital abhi I mean they they build14:04headquarters and they have small amounts14:06of inventory in some cases research and14:08development Florida decision

but if you14:10took you don't need it yeah absolutely I14:12could run those businesses and they let14:14me take a brunt of a lot better with14:16absolutely no equity capital in fact a14:18huge negative echo Apple you can't run14:21Exxon Mobil with with that negative14:23capital you know you can't run US Steel14:25you can't let the railroads you can't14:27run the you know all these massive14:29industries that really what the country14:32was built on up till not that many years14:34ago and now there's this huge shift to14:37intangibles Apple has a quarter of a14:39trillion dollars that it's keeping much14:41of it offshore would it make sense to14:43have that money brought back to the14:45United States does it matter I would say14:47yes it does matter we don't want people14:49artificially shifting money to some14:51foreign place to avoid US taxes well14:54that's not an artificial if you're14:56really making the money in the foreign14:57place and they'd only have a hike Texas14:59we care if somebody makes a lot of money15:02in some foreign place and brings it back15:04at the low tax I think15:07so having all this money piled up abroad15:09and then borrowing against officially15:12it's a calculating system so how do we15:14fix it oh I think they did they ran it15:17back have you had a one-time forgiveness15:19and I don't think that would hurt namely15:20do you view IBM and Apple differently15:24I regard them as being them quite15:25different business

I think Apple was15:27much more of a consumer products15:29business in terms of the in terms of15:32sort of analyzing multi-router and15:36consumer behavior and all that sort of15:38things obviously a product with all15:41kinds of tech built into it but in terms15:44of laying out what their prospective15:48customers will do in the future as15:50opposed to say on IBM's customers it's a15:52different sort of analysis that doesn't15:54mean it's correct and we'll find out15:55over time but they are two different15:59types of decisions I was wrong on the16:02first one and we'll find out whether I'm16:05right or wrong on this on the second but16:07I don't I do not regard them as apples16:10and apples and I don't quite regard them16:11as apples and oranges but it's somewhat16:14in between that's a different kind of16:16thinking from the way Warren came up16:17he's changed and and I think he's shade16:23treated by his heir lives and he's he's16:26changed

sort of devised a Apple think of16:29a hoodie we've known over the years of16:32my high tech we just don't understand16:34that it's not as I go to competency and16:37what are we appear in the press with the16:41Apple a bunch of airlines16:46I don't think we've got one crazy I16:48think the answer is we're adapting16:50reasonably new businesses government16:53very much more difficult and I don't16:56think we have a cinch neither those16:58positions I think we have the odds a17:00little bit in our favor that's the best17:03advantage we can get we'll just have to17:05live on the advantage we can get17:08I just to say you have to marry the best17:12person that will have you and I'm afraid17:15that's her old life and you you have to17:18get by the life of the best advantage17:21indeed to get and things have gotten so17:23difficult in the investment world that17:26we have to be satisfied with the type of17:29advantage that we used to get on the17:34other hand the thing that caused it to17:36me so delegated is he got so enormously17:38rich and that's not a bad trade-off

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