Will Apple Be A New Cash Cow For Berkshire Hathaway? – Forbes

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Photographer: Luke MacGregor/Bloomberg

For years, Warren Buffett’s Berkshire Hathaway was after companies with sustainable competitive advantage—companies that had built “moats,” barriers to keep the competition off their highly profitable businesses.

In recent years, Berkshire Hathaway seems to have augmented this strategy by including companies that have turned into ATM machines, or cash cows, dispensing billions of dollars to stockholders in the form of hefty dividends and stock buybacks.

IBM was one of those companies. Back in 2011, Berkshire Hathaway poured billions of dollars into the legendary company, which had been pursuing shareholder friendly policies like share buybacks and hefty dividend payouts.

The trouble is that those policies weren’t sufficient to deliver superior stockholder returns, for a simple reason: the company failed to sustain its competitive advantage and return back to its old high sales and high-margin growth days.

That’s why IBM missed the big high-tech rally of the last five years.

Apparently, betting on IBM wasn’t a terribly good idea for Warren Buffett. And it could explain why Berkshire Hathaway is dropping IBM altogether for another Cash Cow — Apple.

Unlike IBM, Apple’s shareholder friendly policies have been delivering superior results, as the company continues to enjoy sustainable competitive advantage that delivers high operating margins and strong sales growth—see tables.

Apple’s Key Financial Metrics as of May 4, 2018

Forward PE 13.93
Operating Margin 26.87%
Qtrly Revenue Growth (yoy) 12.70%
Qtrly Earnings Growth (yoy) 12.20%

Source: Finance.yahoo.com

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Photographer: Luke MacGregor/Bloomberg

For years, Warren Buffett’s Berkshire Hathaway was after companies with sustainable competitive advantage—companies that had built “moats,” barriers to keep the competition off their highly profitable businesses.

In recent years, Berkshire Hathaway seems to have augmented this strategy by including companies that have turned into ATM machines, or cash cows, dispensing billions of dollars to stockholders in the form of hefty dividends and stock buybacks.

IBM was one of those companies. Back in 2011, Berkshire Hathaway poured billions of dollars into the legendary company, which had been pursuing shareholder friendly policies like share buybacks and hefty dividend payouts.

The trouble is that those policies weren’t sufficient to deliver superior stockholder returns, for a simple reason: the company failed to sustain its competitive advantage and return back to its old high sales and high-margin growth days.

That’s why IBM missed the big high-tech rally of the last five years.

Apparently, betting on IBM wasn’t a terribly good idea for Warren Buffett. And it could explain why Berkshire Hathaway is dropping IBM altogether for another Cash Cow — Apple.

Unlike IBM, Apple’s shareholder friendly policies have been delivering superior results, as the company continues to enjoy sustainable competitive advantage that delivers high operating margins and strong sales growth—see tables.

Apple’s Key Financial Metrics as of May 4, 2018

Forward PE 13.93
Operating Margin 26.87%
Qtrly Revenue Growth (yoy) 12.70%
Qtrly Earnings Growth (yoy) 12.20%

Source: Finance.yahoo.com

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