For Warren Buffett, Berkshire Hathaway, the big issues haven’t

In early 2022, there have been some notable signs that it is becoming more of a Berkshire Hathaway kind of stock market. All of the Covid outperformance from Ark Invest’s flagship Innovation ETF relative to Berkshire Hathaway was wiped out, and Warren Buffett’s company surpassed Meta in market value.

Speaking of the recent run and rally in 2021 as well, “It has had a good year,” said James Shanahan, Edward Jones analyst. Shares are up roughly 5% this year amid a broader U.S. stock market that recently dipped into correction.

As Berkshire releases its latest earnings and annual letter to shareholders, some of the biggest issue for the future of the company have not changed, even as the market tumult has, in the short-term, puts its approach back into favor. And the big issues are, literally, best portrayed through the biggest numbers. At one point this year, before investors turned to Berkshire as a flight to safety trade, its stake in Apple and its cash on the balance sheet were both rivaling the value that the market was giving to all of the Berkshire operating companies combined (roughly $150 billion – $160 billion each). That has changed, but the underlying issues remain.

Warren Buffett’s long-time aversion to technology is now long gone and Apple now the company’s biggest stock holding, and long-time Berkshire Hathaway expert and George Washington University professor Lawrence Cunningham says in hindsight it’s become clear that the Berkshire bet on Apple should never have been much of a surprise. By the time it started acquiring Apple shares it was clear how large a runway the company had for growth and scale. Certain kinds of technology themes might still be a bridge too far for Berkshire, such as pure-play EVs and AI, but with Apple over the past decade, Cunningham says, what has been seen is a market leader similar to an auto company in the 1920s.

Apple has done so well, though, that is has created a stock concentration issue unlike any Berkshire has faced before. At one point this year, Apple’s value within the Berkshire stock portfolio was equal to the value of all of Berkshire’s operating companies combined. The stake is currently valued at around $150 billion and as Berkshire has gained amid the market volatility, the value of Apple relative to the rest of Berkshire has come down, but it’s still huge, and represents a little under half of all the stock owned by Berkshire.

Cunningham says investors should focus less on Apple’s weight in Berkshire than the fact that Buffett has always believed in holding a concentrated…