Warren Buffet and Charlie Munger have made billions of dollars over a 51-year partnership by buying shares in great businesses and owning them for the long term. “We’ve really made the money out of high quality businesses,” says Munger.
Here are some characteristics that Apple shares with other quality businesses:
Apple the brand
Many quality businesses own great branded products and services and Apple is no exception. The Apple iPhone has revolutionised the cellular phone industry to date. The iPhone is one of the most sought after phones on the market and Apple has consistently been ranked as one of the most valuable brands in the world and according to the BrandZ 100 Report, it has become the most valuable global brand. Apple has built its brand through strategically positioned marketing campaigns and innovative product designs, that have changed the face of technology.
Apple does not sell the cheapest products. There are cheaper products on the market, sometimes with more capability and features than the iPhone, Macbook and iPad. Apple’s brand model is based on the premium market because users know that not only are Apple products easy to use, but that they are of the highest quality and have a support mechanism in place through the iStore.
Apple the cash generator
Apple’s net income has soared in the last few years, growing to $10.7 billion. Making most of its money off the iPhone, Apple has sold 46.5 million iPhones in the first quarter of 2015. Apple has a lot of cash on hand, over $200 billion, making it the first corporation to cross the $200 billion threshold.
Apple is investor friendly
Apple has recently increased its reserve for share buybacks to March 2017 to $200 billion. Tim Cook, Apple CEO, also committed to increasing shareholder dividends at the annual meeting on 26th of February 2016. Having a healthy cash flow and a strong balance sheet indicates that the company is looking to increase value for its shareholders. This provides a valuable-cushioning mechanism for stock volatility and creates a support base for the stock. Apple have also bought back approximately 31 million of its own shares in the open market and 38 million more shares from big financial institutions, which was a tremendous help in breaking some of the fall when so many investors were selling scared.
Apple is cheaper than a year ago
Warren Buffet and Charlie Munger will not buy a business, even a great one, at any price. They love bargains. Apple’s share price is down 23% and is therefore cheaper than a year ago. There is also short-term noise in the press regarding iPhone Sales peaking, iPad sales declining and the scuffle with the FBI over privacy. These are the moments that test investor’s resolve.
The fact is that Apple will be a great investment for years to come, this is because the company has built the capability to create products that many people around the world are prepared to pay a premium for. Because people trust the brand, they are more likely to be loyal and buy new and upgraded products as they are released.
If you would like to invest directly in Apple shares and other quality companies with great brands, contact our fund manager and have a chat about how he can help you build a personal investment plan.