By Joyce Yu
Philadelphia, PA–The Wall Street opened higher on Monday morning on comments from billionaire investor Warren Buffett, from his decision to retire from Kraft Heinz’s board to cut down his travel commitment, to his views on Apple.
During his interview with CNBC’s “Squawk Box.”, the investment guru said, “If you look at our holdings, you would assume that we like them in the order in which they rank by dollar value of holdings, but if you look at them in terms of recent purchases over the last year we’ve bought more Apple than anything else.”
Apple has been under pressure after the sales of its iPhone X fell short of expectation, but Buffett thinks Apple is such an attractive investment. He explained, “Apple has an extraordinary consumer franchise.” “I see how strong that ecosystem is, to an extraordinary degree. … You are very, very, very locked in, at least psychologically and mentally, to the product you are using. [IPhone] is a very sticky product.”
When asked why he still uses a flip phone instead of an Apple iPhone, he said, “Tim Cook asked me that. Well the answer is just I’m out of touch. But I tell Tim, as long as I haven’t gotten one the market is not saturated. The day I buy one, there is probably nobody left after that.”
Buffet, the owner and CEO of investment firm Berkshire Hathaway, also shared his view on GE which he helped inject capital into during the financial crisis. Saying he was “staggered” by the size of the charge General Electric Co. took earlier this year for an old insurance portfolio, Buffet also pointed the problem to the accounting at GE which “has not been a model at all in recent years.” Berkshire has mostly sold GE’s stock and hasn’t bought any GE stock recently.
Favoring equities in the longer term over bonds, Warren Buffett said, “If you had to choose between buying long-term bonds or equities, I would choose equities in a minute.” In his annual letter to investors on Saturday, however, he acknowledged higher risks associated with investment in stocks. He wrote, “I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier — far riskier — than short-term U.S. bonds.”
“As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.”
Buffett reported in the letter that Berkshire Hathaway made a $65.3 billion net gain in 2017, but roughly $29 billion of that came from changes to the US tax code.
