Apple Inc. (AAPL), Alphabet Inc (GOOGL): Warren Buffett Talks Tech Titans

Legendary investor Warren Buffett of Berkshire Hathaway isn’t exactly known for his knowledge of the tech space. In fact, as we detailed on Friday, his biggest tech bet ever, on International Business Machines Corp. (NYSE:IBM), may go down in history as one of his worst investments ever, with the holding still being in the red six years after he started amassing it.

Nonetheless, when Buffett speaks, investors would be wise to listen, and Buffett did just that recently, carrying out an extensive interview with CNBC from the Oracle of Omaha’s home base (Omaha, naturally), where Berkshire Hathaway Inc. (NYSE:BRK.A) just held its annual meeting. The interview touched on Buffett’s investment in Apple Inc. (NASDAQ:AAPL) as well as what he thinks about Alphabet Inc (NASDAQ:GOOGL), which we’ll discuss in this article.

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Buffett On Alphabet

In the CNBC interview, Warren Buffett lamented Berkshire’s lack of an investment in Alphabet Inc (NASDAQ:GOOGL) (then Google) early on, saying that while the competitive landscape may have been difficult for him to judge, the signs of its early success were there.

“I should’ve had some insight into it (Google) because Geico (a subsidiary of Berkshire Hathaway Inc. (NYSE:BRK.A) since 1996) was a heavy user very early on. So here we saw value and something that, I have no idea what we’re paying per click now, but we were paying 10 or 11 dollars per click for something that had no cost of goods sold, and we were going to keep doing it.”

While Buffett admitted that he had little insight into the technology and whether a competitor like Microsoft Corporation (NASDAQ:MSFT)’s Bing could’ve come along and pushed Google aside, he was aware of the benefits to Google’s users.

Despite Alphabet Inc (NASDAQ:GOOGL)’s robust valuation now, Buffett stated that if he was forced to either buy or short the stock, he would buy it (as he would Amazon.com, Inc. (NASDAQ:AMZN)), but that it was hard to pull the trigger at a much higher valuation psychologically after considering it but passing at a lower one.

We’ll check out Buffett’s comments on Apple on the next page.

Buffett on Apple

The interview then moved on to Buffett’s investment in Apple Inc. (NASDAQ:AAPL), with Buffett being asked why he decided to finally pull the trigger on Apple despite it also having risen substantially in value over the years.

“Well, the shares when we bought them at least, were much more reasonable in relation to current earnings. Apple didn’t have to do a lot better in the future than they were doing at the current time. When you get into a Google and Amazon, you’re paying for the future more.” Buffett added that, “it’s amazing where Apple’s ended up with consumers. I can very easily determine the competitive position of Apple now and who’s trying to chase them and how easy it is to chase them.”

Buffett exclaimed that smartphones are a somewhat unique market in that product is generally superior to pricing. Whereas a sale on TVs might spur a consumer to buy the model that’s on sale, that’s not the case with smartphones.

“You can’t move people by price in the smartphone market remotely like you can move them in appliances or all kinds of things. People want the product, they don’t want the cheapest product; the loyalty is huge.”

Berkshire Hathaway owned 57.36 million shares of Apple Inc. (NASDAQ:AAPL) on December 31, buying over 42.13 million shares in the fourth quarter. The investment has been a huge success for the holding company, with Apple’s shares gaining 31.7% so far in 2017. Last week, Berkshire reported first-quarter revenue of $65.19 billion and income of $4.06 billion. Revenue was up by 25% year-over-year, though profit slumped by 27% as Berkshire’s insurance businesses suffered a $480 million decline in profit.

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