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Should You Dump Apple Following Buffett? ETFs in Focus
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In the fourth quarter of 2023, Warren Buffett's Berkshire Hathaway (BRK.B - Free Report) made adjustments to its holdings, notably trimming its flagship position in Apple. Berkshire sold about 1% of its Apple (AAPL - Free Report) shares during this period, reducing its stake in the iPhone maker to 5.9%, valued at approximately $167 billion as of Wednesday, according to Dow Jones Market Data, as quoted on Wall Street Journal.
Notably, Apple shares added only 3.6% in the past six months, while Berkshire shares added 11.3%. Investors should note that in previous years, Apple’s position within the Berkshire portfolio grew significantly, marking a substantial portion of its more than $300 billion stock portfolio.
As Apple's stock soared in the past few years, climbing 367% since the end of 2018 compared to the S&P 500's doubling, investors and market observers have been curious about what Buffett’s action with Applecould be now — grabbing more shares or dumping to book profits?
Buffett had previously spoken highly of Apple, lauding it as a superior business compared to others within Berkshire's portfolio. But the latest move of trimming Berkshire’s Apple holdings suggests a strategic adjustment in its investment approach, reflecting portfolio diversification or profit-taking due to Apple’s latest rough patch.
What Do Indicators Say About Apple’s Value Status?
Going by valuation metrics, the P/E (ttm) of AAPL is 28.7 times versus the industry average of 28.6 times. The forward P/E of AAPL is 28.1 times versus the industry score of 25.0 times. Though these measures point to a higher valuation of Apple than the industry, a higher P/E is not always a sign of worry. It shows investors’ confidence in a particular stock among the bunch.
Investors should note that the return-on-equity of Apple is 156%, moderately higher than the industry average of 135.0%. Plus, return-on-assets is marginally higher than the industry measures. The estimated 3-5-year EPS growth of Apple is now 12.7% versus the industry measure of 10.4%.
Investors should note that the AAPL stock has a Zacks Rank #3 (Hold). It has a Growth Score of A at the time of writing. The above-said numbers explain that Apple is not significantly overvalued at the current level. This could be because Apple’s run in the past one year has been pretty muted compared to most other “Magnificent Seven” stocks.
For example, Apple has risen 19.9% over the past year versus Microsoft’s 50.9% gains and Nvidia’s 239.2% surge. This could be because of Apple’s lesser exposure to Artificial Intelligence (AI) — the talk of the town — as compared to the other tech biggies.
Apple’s Price Target
Based on short-term price targets offered by 26 analysts, the average price target for Apple comes to $207.75. The forecasts range from a low of $158.00 to a high of $250.00. The average price target represents an increase of 12.27% from the last closing price of $185.04.
Broker Ratings on Apple
Apple currently has an average brokerage recommendation (ABR) of 1.80 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 28 brokerage firms. The current ABR compares to an ABR of 1.80 a month ago based on 28 recommendations.
Of the 28 recommendations deriving the current ABR, 16 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 57.14% and 10.71% of all recommendations. A month ago, Strong Buy made up 57.14%, while Buy represented 10.71%.
Are ETFs Better Bets?
Investors intending to follow Warren Buffett but still having faith in Apple’s potential rally may take the ETF route. This is because ETFs help investors mitigate one company’s average performance with the other companies’ stellar results. Several Apple ETFs have Microsoft in their kitty.
Below, we highlight a few ETFs with heavy exposure to Apple for investors seeking to bet on the stock with much lower risk.
iShares Dow Jones US Technology ETF (IYW - Free Report) – AAPL takes the second spot with 17.90% weight. The fund has a Zacks Rank #1 (Strong Buy). Microsoft takes the second spot with about 17% exposure.
Select Sector SPDR Technology ETF (XLK - Free Report) – AAPL holds the second spot with 23.08% weight. The fund, which has a Zacks Rank #1, also has Microsoft (with 22.72% weight) in its basket.
Vanguard Information Technology ETF (VGT - Free Report) – AAPL occupies the first location with 23.08% weight. The fund has a Zacks Rank #1. Microsoft takes about 22.72% weight while Nvidia takes about 4.31% weight.
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Should You Dump Apple Following Buffett? ETFs in Focus
In the fourth quarter of 2023, Warren Buffett's Berkshire Hathaway (BRK.B - Free Report) made adjustments to its holdings, notably trimming its flagship position in Apple. Berkshire sold about 1% of its Apple (AAPL - Free Report) shares during this period, reducing its stake in the iPhone maker to 5.9%, valued at approximately $167 billion as of Wednesday, according to Dow Jones Market Data, as quoted on Wall Street Journal.
Notably, Apple shares added only 3.6% in the past six months, while Berkshire shares added 11.3%. Investors should note that in previous years, Apple’s position within the Berkshire portfolio grew significantly, marking a substantial portion of its more than $300 billion stock portfolio.
As Apple's stock soared in the past few years, climbing 367% since the end of 2018 compared to the S&P 500's doubling, investors and market observers have been curious about what Buffett’s action with Applecould be now — grabbing more shares or dumping to book profits?
Buffett had previously spoken highly of Apple, lauding it as a superior business compared to others within Berkshire's portfolio. But the latest move of trimming Berkshire’s Apple holdings suggests a strategic adjustment in its investment approach, reflecting portfolio diversification or profit-taking due to Apple’s latest rough patch.
What Do Indicators Say About Apple’s Value Status?
Going by valuation metrics, the P/E (ttm) of AAPL is 28.7 times versus the industry average of 28.6 times. The forward P/E of AAPL is 28.1 times versus the industry score of 25.0 times. Though these measures point to a higher valuation of Apple than the industry, a higher P/E is not always a sign of worry. It shows investors’ confidence in a particular stock among the bunch.
Investors should note that the return-on-equity of Apple is 156%, moderately higher than the industry average of 135.0%. Plus, return-on-assets is marginally higher than the industry measures. The estimated 3-5-year EPS growth of Apple is now 12.7% versus the industry measure of 10.4%.
Investors should note that the AAPL stock has a Zacks Rank #3 (Hold). It has a Growth Score of A at the time of writing. The above-said numbers explain that Apple is not significantly overvalued at the current level. This could be because Apple’s run in the past one year has been pretty muted compared to most other “Magnificent Seven” stocks.
For example, Apple has risen 19.9% over the past year versus Microsoft’s 50.9% gains and Nvidia’s 239.2% surge. This could be because of Apple’s lesser exposure to Artificial Intelligence (AI) — the talk of the town — as compared to the other tech biggies.
Apple’s Price Target
Based on short-term price targets offered by 26 analysts, the average price target for Apple comes to $207.75. The forecasts range from a low of $158.00 to a high of $250.00. The average price target represents an increase of 12.27% from the last closing price of $185.04.
Broker Ratings on Apple
Apple currently has an average brokerage recommendation (ABR) of 1.80 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 28 brokerage firms. The current ABR compares to an ABR of 1.80 a month ago based on 28 recommendations.
Of the 28 recommendations deriving the current ABR, 16 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 57.14% and 10.71% of all recommendations. A month ago, Strong Buy made up 57.14%, while Buy represented 10.71%.
Are ETFs Better Bets?
Investors intending to follow Warren Buffett but still having faith in Apple’s potential rally may take the ETF route. This is because ETFs help investors mitigate one company’s average performance with the other companies’ stellar results. Several Apple ETFs have Microsoft in their kitty.
Below, we highlight a few ETFs with heavy exposure to Apple for investors seeking to bet on the stock with much lower risk.
iShares Dow Jones US Technology ETF (IYW - Free Report) – AAPL takes the second spot with 17.90% weight. The fund has a Zacks Rank #1 (Strong Buy). Microsoft takes the second spot with about 17% exposure.
Select Sector SPDR Technology ETF (XLK - Free Report) – AAPL holds the second spot with 23.08% weight. The fund, which has a Zacks Rank #1, also has Microsoft (with 22.72% weight) in its basket.
Vanguard Information Technology ETF (VGT - Free Report) – AAPL occupies the first location with 23.08% weight. The fund has a Zacks Rank #1. Microsoft takes about 22.72% weight while Nvidia takes about 4.31% weight.