Apple shares have rebounded nicely following the recent sell-off, but Warren Buffett’s decision to halve his stake in the company must be unsettling some investors.
Yes, Buffett still has a huge shareholding in Apple. Yes, he wanted to take advantage of lower capital gains taxes (21 per cent today, compared to 35 per cent not so long ago) before the US election, necessitating some profit-taking.
Still, Apple’s valuation today is very different from when Buffett first bought the stock in 2016, notes Creative Planning strategist Charlie Bilello.
Apple’s price-earnings ratio has gone from below 10 to above 30 and its price-sales ratio from two to nine – the highest in its history.
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Put another way, Apple’s share price gains over the last decade (859 per cent) have “far outpaced its fundamental growth” (revenues increased 111 per cent).
Bilello’s point: a value investor like Buffett has surely noticed Apple isn’t cheap any more – far from it.
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