Warren Buffett (Trades, Portfolio)‘s most successful investment ever is now Apple (AAPL, Financial). Now that the company has reached a valuation of $3 trillion, the stock is not only the largest and most successful holding in his portfolio at Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial), but it has also become the best performing stock in terms of the overall percentage return.
This whole scenario is quite an interesting case study of what it is possible to achieve from an investment. There are a couple of reasons why this investment stands out in particular in the history of the Oracle of Omaha, aside from its performance.
Moving on from disaster
Buffet first started buying Apple back in 2016. At the time, he was coming off the back of a disastrous investment in International Business Machines (IBM, Financial), his first substantial investment in the technology sector. The failure at IBM did not discourage the billionaire investor from taking another stab at investing in technology. Between 2016 and 2018, he ended up spending around $36 billion of Berkshire’s capital on Apple stock.
The reasons why he decided to build a position in Apple have been well covered over the past couple of years. He believed he saw an attractive franchise in the company, which had a sticky customer base and room for growth over the next couple of decades. I am not going to look at these reasons in this article. Instead, I want to focus on the factors I believe contributed to Buffett’s Apple buy in 2016, a decision that has generated fantastic results for himself and his investors over the past six years.
When Buffett made a mistake with IBM, it would have been quite easy for him to say that he would never invest in the technology sector ever again and stick with the companies he knew best. This is the approach many other investors might have taken. They may have been scared away from the technology sector for good.
However, Buffett has never been one to spend too long dwelling on a mistake and let it influence his future decisions. He moved on from the IBM error and started looking for other opportunities.
I think this is the first significant lesson that can be learned from the Apple case study. Investors will always encounter failures. As long as these failures are not terminal, there will always be other opportunities. These other opportunities have the potential to produce transformative results, just as Apple has become for Berkshire and Buffett.
Continuous learning
The second lesson that I believe is important to note is that of continuous learning. Buffett could have decided that after IBM, he would stay away from technology forever. He could have decided he was going to stay away from technology forever before he invested in IBM, but he clearly saw the potential of the industry. He is likely to have seen how his companies interacted with the technology that IBM was supplying and other technological resources. From that, he may have built a better understanding of the industry and its prospects.
Buffett was able to learn about the technology and seek out new opportunities. Once again, this is something many investors completely ignore. Continuous learning and development requires time and effort. Many investors try to reduce their activity by the time they reach retirement age, but Buffett has not been slowing down. It is notable that he found Apple towards the end of his career. I think there is something to be said for investing for the long term, even potentially after when one expects to leave this world. There is just no telling when the next opportunity will arrive.
These are some essential lessons from the Apple case study, and they show why investors must be looking for the next opportunity constantly. One never knows when it will come along.
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