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Buffett’s Massive Bet On Apple Makes Sense

Apple

Apple was up almost 4 percent in afternoon trading Friday, closing in on its all-time high as Warren Buffett’s Berkshire Hathaway gave it another big nod by buying more of the tech giant’s stock.

Buffett told CNBC that Berkshire Hathaway had added another 75 million Apple shares it its portfolio, bring the entire holding to more than 240 million shares.

(Click to enlarge)

While everyone else is “obsessing” over missed iPhone X sales targets, Buffett sees things differently, and his comments move markets, as they did for tech today. In fact, Buffett said, the narrow-minded focus on the iPhone X sales “totally misses the point”.

And some think Buffett still isn’t done with Apple:

"I don't think he's done. I think the numbers of the investment in Apple are going to go higher and maybe even significantly higher," David Rolfe, CIO of Wedgewood Partners, which counts Berkshire and Apple as its two largest holdings, told CNBC.

CNBC’s Jim Cramer said that Buffett “thinks young”.

"Analysts after analysts said if you look at the mosaic of [iPhone] orders, it's got to be a bad quarter," but Buffett “obviously does not think about the quarter. He thinks of this as a consumer products company with 99 percent satisfaction."

Apple released its earnings report on 1 May, and the overall verdict was that the iPhone X isn’t really faring so poorly.   Related: Banking Giants Forced To Pick Sides In Saudi-Qatar Rivalry

Revenue growth was 16 percent, while EPS growth was 30 percent and dividends were raised by 16 percent. To top it off, Apple announced a new $100-billion share buyback program.

“Our business performed extremely well during the March quarter, as we grew earnings per share by 30 percent and generated over $15 billion in operating cash flow,” said Luca Maestri, Apple’s CFO.

“With the greater flexibility we now have from access to our global cash, we can more efficiently invest in our US operations and work toward a more optimal capital structure. Given our confidence in Apple’s future, we are very happy to announce that our Board has approved a new $100 billion share repurchase authorization and a 16 percent increase in our quarterly dividend.”

Apple will complete the execution of the previous $210 billion share repurchase authorization during the third fiscal quarter.

And if you read the earnings details closely, you might just start to see where Buffett is coming from: This isn’t just about the iPhone X. There’s much more.

For starters, we learned that Apple’s headphones (Beats) and the Apple Watch—in other words its ‘wearables’ segment, earns than either Ebay or Netflix. Apple also has twice as many subscribers as Netflix, reporting 270 million.

Services revenue and accessories revenue also saw sharp spikes.

By Michael Scott for Safehaven.com

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