Apple is “the best business” that Warren Buffett has “ever owned.”
That’s what David Clark, co-author with Mary Buffett of “The New Tao of Warren Buffett” and quoting the investor himself, maintains in an interview with ThinkAdvisor.
In 2024, Buffett, known as the “Oracle of Omaha,” reportedly sold 25% of his shares in Apple, or $600 million, as well as billions of dollars’ worth of Bank of America stock.
He’s stockpiling cash mainly to protect Berkshire Hathaway after he’s gone, argues Clark. Buffett is 94.
“He’s setting himself up to make his last great bargain buy, as a result of his death,” says Clark, who grew up in Omaha and attended grade school and camp with Buffett’s children.
“When he passes on, Berkshire Hathaway’s stock is going to tank. So he’s loading up with cash [about $325 billion] and told Greg Abel [whom he appointed successor CEO] to buy back the stock at a bargain price at his death,” Clark offers.
Mary Buffett, Warren Buffett’s former daughter-in-law, contributes to HuffPost and has an online school teaching successful portfolio building. She and Clark have co-written eight other books about Buffett’s investing.
The son of a stockbroker who became a congressman from Nebraska, Buffett was enterprising from the start. As a boy, he sold Coca-Cola door to door and created a horse racing tip sheet he peddled for $3 each. He bought his first stock at age 11.
Now, Berkshire Hathaway owns 67 companies with 260 subsidiaries. Its stock price has risen from $20 a share in 1967 to $632,000 a share in 2024.
No wonder “The New Tao …” was subtitled “Wisdom from Warren Buffett to Help Guide You to Wealth and Make the Best Decisions about Life and Money.”
In the interview with Clark, a former practicing lawyer who teaches trial work to attorneys, he discusses Buffett’s overall investing approach and why he calls portfolio reweighting “nonsense.”
Here are highlights of our conversation:
THINKADVISOR: Warren Buffett avoided investing in technology companies because he wasn’t knowledgeable about that business, he has said. Then he bought Apple. By the beginning of 2024, he had a profit of about $145.8 billion, you write. What prompted him to buy Apple?
DAVID CLARK: Because it was the winner. Apple won that game. It prints money. It’s the best business he has ever owned. He said that.
Didn’t he sell quite a bit of it in 2024?
Yes, he did. There are two reasons. One is that the market is extremely high. The other is that he’s gotten very, very old [94]. So he’s setting himself up to make his last great bargain buy as a result of his death. I think that’s kind of cool.
Please explain.
When he finally passes on, which will probably be in the next couple of years, Berkshire Hathaway’s stock price is going to tank.
So he’s loaded up with cash — $322 billion — and has told [vice chair of non-insurance operations] Greg Abel, who will take over as CEO at Buffett’s death, to buy back the stock at a bargain price.
So when Warren passes, Greg will go in and buy it.
Does Buffett regret not investing in other technology?
He laments not buying Alphabet. But the reason he doesn’t buy technology as it’s evolving is that he doesn’t know if he’s going to be a winner. So he stays away from it.
The way you write about it, Buffett’s investing methodology in general seems very simple. But what’s the magical part that’s made him such a huge success?
He won’t buy unless he thinks it’s a good deal. The market is a very short-sighted machine, and he looks at prices from a long-term perspective.
He has a really good understanding of business. Most investors don’t have that at all. They don’t understand it, and they don’t want to. They’re just gambling, or they put money in a mutual fund group and go fishing.
What’s Buffett’s underlying investing philosophy?
He developed a way of thinking about a business as a consumer monopoly, which, in the early days, was, say, Coca-Cola or Wrigley gum.
And certain insurance companies have consumer monopolies on pricing, like Geico.
The market couldn’t see [these companies’] long-term value — which he could — and it never priced them accordingly.
[The consumer monopoly concept] was really a great revelation in Warren’s life because at that time he was basically buying beaten-down stocks that he thought had upside in them and selling at half of book value. But that market dried up.
You write that Buffett regards the 60/40 portfolio and portfolio reweighting as “nonsense.” Why?
Because those are mostly a tool for getting people to move in and out of things, and it doesn’t make any sense at all:
“Oh, we’re going to have a bond position and move that to this and this to that” — just so some money manager can make more money and get his clients to feel like they’re doing something.
Buffett doesn’t care about whether the Federal Reserve is raising or cutting interest rates, you write. Why not?
Because he’s waiting for a black swan event and prices to go down. He’ll find the best deals, and then he’ll buy.
