Berkshire Hathaway ( BRK.A 0.83% )( BRK.B 0.70% ) CEO Warren Buffett has a penchant for making money. Since becoming CEO in 1965, he’s created more than $790 billion in value for shareholders (himself included), as well as overseen an aggregate return on the company’s Class A (BRK.A) shares of 4,355,005%, through March 27, 2022.
While there are numerous reasons for the Oracle of Omaha’s success, they all effectively boil down to making smart investments and acquisitions. The following three investments are arguably Buffett’s greatest of all time.
Greatest nominal dollar return: Apple
In terms of nominal dollar returns, there’s little question that tech-kingpin Apple ( AAPL -0.67% ) takes the crown.
According to Berkshire Hathaway’s 2021 annual shareholder letter, Buffett’s company spent $31.089 billion to acquire 907,559,761 shares of Apple. For those of you keeping score at home, this works out to a cost basis of $34.26 a share. But as of the closing bell on March 25, Apple’s shares were changing hands at $174.72. This equates to a market value of approximately $158.6 billion and an unrealized gain totaling $127.5 billion.
Keep in mind, the above unrealized gain doesn’t factor in the nearly $800 million in dividend income Buffett’s company is generating annually from owning more than 907 million shares of Apple, nor does it account for the small percentage of Apple shares Berkshire previously sold at a profit.
These incredible returns are primarily a function of Apple’s innovation. Based on data from Counterpoint, Apple accounted for 56% of all U.S. smartphone sales during the fourth quarter. That was up from 40% in the third quarter of 2020. Since introducing 5G-capable iPhones, the market-share gap between Apple and Samsung, the No. 2 in U.S. smartphone share, has grown from 10 percentage points to 34.
Apple CEO Tim Cook is also overseeing a long-term evolution that’ll focus the company’s attention on subscription services. A bigger emphasis on services can reduce the revenue lumpiness associated with product-replacement cycles, as well as lift the company’s margins over time.
Warren Buffett is a big fan of Apple’s hearty capital-return program, too. Apple has spent hundreds of billions of dollars repurchasing its shares and also raised its dividend multiple times. As long as the company continues to innovate and reward shareholders, I don’t believe we’ll see Buffett or his investment team pare down this enormous stake.
Greatest return from an acquisition: GEICO
Whereas Apple is Buffett’s greatest nominal dollar investment of …….