Apple bounces back on Berkshire stake, China trip
Apple shares bounced back big Monday after a billionaire investor's firm disclosed a bet on the company as Apple CEO Tim Cook began a highly anticipated business trip to China.
Warren Buffett's Berkshire Hathaway took a $900 million stake in Apple through the purchase of 9.8 million shares in the first quarter of 2016, the Omaha, Neb.-based holding company said in a Securities and Exchange Commission filing Monday. That investment would have been worth more than $1 billion at the end of the quarter, when Apple stock was $108.99.
Cook, meanwhile, began a tour of China, the second-biggest market for the company, days after Apple announced it invested $1 billion in Chinese Uber rival Didi.
The confluence of news sent Apple (AAPL) shares up nearly 4% in trading Monday to $93.88. The stock, which closed Friday at $90.52, has fallen 13% during the last month.
In China, Cook checked out Apple's latest investment. A tweet he posted Monday showed him with Didi President Jean Liu in a Didi vehicle.
“We are very proud of that investment,” Cook told journalists outside of an Apple store in Beijing, the Financial Times reported. Cook was joined by several Chinese Internet entrepreneurs.
After several weeks of bad news, culminating in its worst year-over-year quarterly results in more than a decade, Apple's comeback Monday could reverse a recent stock slide that dislodged it from its perch as the most-valuable company in the world. Google parent Alphabet took the top spot last week. Apple's bumpy stock ride — low-lighted by eight straight days of losses — and concerns about China prompted activist investor Carl Icahn to sell off nearly 50 million Apple shares.
China is considered crucial to Apple's success. It accounted for nearly $60 billion in sales during Apple's last fiscal financial year, but is an area of concern after Apple reported an 11% decline in quarterly sales there last month. A saturated smartphone market and wobbly economy were blamed for the bum quarter. China was part of a larger problem: iPhone sales slumped, year-over-year, for the first time in their 10-year history.
Cook, who has repeatedly underlined the importance of Asia, said he is confident the China market will bounce back as its middle class continues to grow. He's also expected to visit Prime Minister Modi in India, according to a Reuters report citing unnamed sources. India is another populous country where Apple is pinning its future revenue growth.
"The Didi investment and Cook's world tour are interesting in that it signals a new direction for Apple," said Brian Blau, an analyst at market researcher Gartner. "They haven't admitted publicly to a car project, but the $1 billion investment indicates explicit interest in a new product area, such as automated cars."
The enormity of the investment underscores Apple's commitment to both China and the auto market. The company, which announced 11 acquisitions last year, normally scoops up small start-ups.
Back home, the Berkshire investment is considered a significant vote of confidence among investors, although it also reflects Apple's shifting fortunes that the stock — once the epitome of growth and momentum — is now sought after by a firm known for value investing.
Buffett, chairman of Berkshire Hathaway, did not make the purchase himself. In a sign of a new generation of managers at Berkshire, one of two ex-hedge fund managers hired by Buffett made the investment, according to the Wall Street Journal.
Berkshire Hathaway slightly increased its stake in IBM (IBM) by about 20,000 shares to 81.2 million shares. The firm also dropped its investment in AT&T (T), which had a value of about $1.5 billion.
Buffett is also backing a group that includes Cleveland Cavaliers owner Dan Gilbert in its bid to buy Internet assets from Yahoo, a source told Paste BN Friday. Buffett later told CNBC he would consider helping Gilbert finance a potential bid.
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