One of the more interesting places to look for investment ideas is in the list of companies owned by Berkshire Hathaway (BRK.A -0.30%) (BRK. B -0.33%). Longtime CEO Warren Buffett is renowned for his investment acumen, making Berkshire’s portfolio a fascinating glimpse into the mind of one of the world’s biggest investors.
Buffett has a reputation for staying within his area of expertise. Insurance companies and railroads are more often associated with Buffett than with emerging technology. However, if the rumors are to be believed, there’s a chance Buffett might find himself owning a virtual reality company before the end of 2023.
Apple and the constant rumours
While anything’s possible, if the Berkshire portfolio ends up owning a virtual reality company, that’s most likely because of it Apple (AAPL 1.28%). While it’s widely believed that it was one of Buffett’s Berkshire lieutenants who first took a stake in the consumer tech giant, Buffett has been effusive in his praise of Apple and its CEO, Tim Cook. Over the years, Apple has grown to become Berkshire’s largest holding.
For years there has been speculation that Apple is developing a device for augmented reality (AR) or virtual reality (VR). In recent months, those rumors have been heating up, with reports that references to an AR/VR device have been found in the code for other device apps.
While these are still rumours, Apple’s track record suggests that creating a brand new device that could define a new category has credibility. Finally, iPhone, iPad and Apple Watch have been instrumental in the development of the global smartphone, tablet and smartwatch markets.
Apple also has several years of experience in the AR sector. In June 2017, Apple introduced development software to integrate AR into its latest iPhone operating system. In the years that followed, more and more companies added AR capabilities to their apps. This has given Apple years of data and feedback, so when the company releases a hardware device this year, it won’t be starting from scratch.
Don’t buy the rumour, buy the business
To be clear, rumors of a new device shouldn’t be a reason for investors to buy Apple stock. There’s always a chance that Apple will abandon this idea or that the schedule will be delayed. Fortunately for both Berkshire and individual shareholders, Apple is still a wonderful company.
When Apple reported its 2022 results (for its fiscal year ending in September), it was clear evidence that it’s still a strong growth company. While revenue grew just 8% year over year, Apple saw growth in all product categories except iPad product categories. In addition, net sales increased in all regions except Japan.
That growth resulted in free cash flow of $111 billion. This is a clear testament to Apple’s strong financial position that this is the money left over after all investments in a potential AR/VR device. Even if the new hardware doesn’t materialize, investors own one of the best companies in the world.
After all, Apple has a long track record of rewarding shareholders. Over the past 10 years, Apple has reduced its outstanding shares by about 40%. Stock buybacks have the effect of making each share an investor’s worth more, which is a nice perk of owning Apple stock.
Should Investors Buy Apple Stock Now?
Apple may or may not release an AR/VR device in 2023. Considering that Apple is a wonderful company to own independently, I think the recent rumors are an interesting reason to take a second look at the business for those who aren’t already shareholders.
When the new device is announced, Apple will have a track record of breaking into new hardware categories, and this could be good news for the company. If the year ends without a new device, Apple is still a worthy addition to any portfolio.
Jeff Santoro has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple . The Motley Fool has a disclosure policy.
