Apple, the world’s most valuable company, has spent more than $500 billion on stock buybacks since 2012, which is more than the market value of many large companies. Stock buybacks are a way for companies to return cash to shareholders by purchasing their own shares in the open market and reducing the number of outstanding shares. This can increase earnings per share, boost the stock price, and offset the dilution caused by issuing new shares for employee compensation.
Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, is one of the biggest beneficiaries of Apple’s buyback strategy. Berkshire Hathaway owns about 5.4% of Apple’s shares, worth more than $71 billion as of August 11, 2023.
Warren Buffett, a longtime champion of prudent buybacks, has been a cheerleader for Apple’s repurchases. His Berkshire Hathaway empire owns nearly 6% of Apple, and the position accounts for almost half of its roughly $350 billion stock portfolio. When Apple buys back shares, it boosts Berkshire’s ownership at no cost to the conglomerate.
During Berkshire Hathaway’s annual shareholder meeting, Buffett referred to Apple as “a better business than any we own.” He certainly didn’t make this comment lightly. He values Apple for its phenomenally strong brand, its years of innovation, and the company’s steadfastly loyal customer base.
To add, Warren Buffett is also a huge fan of Apple’s capital-return program. In addition to doling out one of the world’s largest nominal-dollar dividends ($15.1 billion per year), Apple has bought back around $600 billion worth of its common stock since the start of 2013. Not only do buybacks improve earnings per share for companies (like Apple) with steady or growing net income, but they can also increase the ownership stakes of existing investors.
Buffett is not the only one who loves Apple’s buybacks. Many other shareholders and analysts have also expressed their support for the company’s capital allocation policy.
Apple is not alone in buying back its own stock. Buffett’s Berkshire Hathaway also bought back $6 billion of its own stock in the second quarter of 2023, bringing its total buybacks to $42.5 billion since the end of 2019.
Stock buybacks have been a controversial topic in recent years, as some critics argue that they benefit only wealthy investors and executives at the expense of workers and society. They also claim that buybacks divert resources from productive investments such as research and development, innovation, and job creation. However, proponents of buybacks counter that they are a legitimate and efficient way for companies to distribute excess cash to shareholders who can then reinvest it in other opportunities. They also point out that buybacks do not necessarily reduce investment or employment, as companies can still fund their growth plans from their cash flow or debt.
The debate over buybacks is unlikely to be settled anytime soon, but one thing is clear: Apple’s $500 billion buyback strategy has paid off handsomely for Buffett and other shareholders who have seen their wealth grow along with the company’s success.
Relevant articles:
- Apple has plowed over $500 billion into stock buybacks since 2012 — more than Visa, JPMorgan, or Exxon are worth, by Theron Mohamed. Published on August 11, 2023.
- Warren Buffett’s Latest $1.3 Billion Buy Brings His Total Investment in This Stock to More Than $71 Billion in 5 Years, by Sean Williams. Published on August 11, 2023.
- Apple stock buybacks are still in full swing, and that’s good news for Warren Buffett, by Alexandra Garfinkle. Published on August 7, 2023.
- Buffett’s Berkshire Hathaway buys back $6 billion of stock in second quarter, by Jonathan Stempel. Published on August 7, 2023.
-Warren Buffett’s Latest $1.3 Billion Buy Brings His Total Investment in This Stock to More Than $71 Billion in 5 Years，The Motley Fool， Published on August 11, 2023.