Warren Buffett's Berkshire Hathaway buys 75M more Apple shares, sells off IBM

Adam Shell | USA TODAY

Show Caption Hide Caption Why Warren Buffett finally bit on Apple Buffett's Berkshire Hathaway just bought 75 million more shares of the iPhone maker.

Warren Buffett's big bet on Apple just got a whole lot bigger. But the billionaire investor is out of IBM.

Buffett's Berkshire Hathaway bought a whopping 75 million more shares of the iPhone maker in the first quarter.

News of Buffett adding to his already sizable stake in Apple was reported by CNBC. The announcement, divulged during a Thursday night interview, came ahead of Saturday's annual shareholder meeting in Omaha, dubbed the "Woodstock of Capitalism." Berkshire is scheduled to release its first-quarter earnings report during the gathering.

Buffett also disclosed that he had sold all of his shares of computer and information giant IBM during another part of the interview CNBC aired Friday.

At the end of 2017, Berkshire Hathaway owned 166.7 million shares of Apple, valued at $28.2 billion, which made it the second-biggest holding behind Wells Fargo, according to Buffett's 2017 letter to shareholders released in February.

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When Buffett unveils his latest list of top-10 stock holdings Saturday, Apple will likely rise to the No. 1 position in Berkshire's stock portfolio, which was valued at $170.5 billion at the end of last year, according to the letter.

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Berkshire's Apple stake is now roughly 241.7 million shares and has an estimated market value of nearly $44 billion, based on Friday's closing price of $183.83. Apple shares are up nearly 9% this year and closed 4% higher and at a new record high Friday.

Buffett, who earlier in his career famously steered clear of tech stocks because he said he didn't understand them, cited the tech giant's earnings prowess as a major reason why he took an even bigger bite of Apple.

"It is an unbelievable company," Buffett told CNBC. "If you look at Apple, I think it earns almost twice as much as the second-most profitable company in the United States."

Apple this week reported first-quarter earnings that topped Wall Street expectations. It booked sales of $61.1 billion and grew earnings by 30%. It sold 52.1 million iPhones and also returned a lot of cash to shareholders, announcing a $100 billion stock buyback plan and raising its dividend.

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Berkshire's stake in Apple, which it began building in early 2016 with a $1 billion investment, was initially driven by one of the money managers Buffett hired to manage the stock side of Berkshire's investments.

In February, Buffett expounded on why he personally is bullish on Apple, which is the world's most valuable company measured by stock market value.

"Apple has an extraordinary consumer franchise," he said in an interview on CNBC. "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."

Berkshire had $116 billion in cash at the end of last year, so it has plenty of spare money to make big investments. Buffett's investment in Apple in the first three months of 2018 totaled roughly $12.5 billion to more than $13 billion.

His initial foray into tech stock investing didn't turn out well. Berkshire's big position in IBM never panned out. The conglomerate held about 2 million shares of IBM at the end of 2017, down from more than 37 million shares three months earlier, according to a regulatory filing.

After earlier acknowledgments that his stake in Big Blue had been a mistake, Buffett told CNBC, "I think we have zero" shares now.

Berkshire Hathaway's own shares haven't fared very well this year. Its "A" shares are down 1.7% in 2018, a bigger decrease than the 0.4% year-to-date decline for the broad Standard & Poor's 500 stock index. On Friday, Berkshire shares rose 1.9% to $292,600.

Warren Buffett was really bullish on this stock in 2017 His company bought a ton of it.

Contributing: Kevin McCoy