Buffett’s buy call
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Generations of value investors have allocated money based on the principles set forth by Warren Buffett. The legendary investor has usually preferred consumer firms with sustainable competitive advantage thanks to strong brands. He has also been known to steer clear of fashionable technology stocks. Many influential Indian investors make the annual pilgrimage to Omaha to hear what Buffett tells his loyalists.
So where does Apple fit in? Many must have been taken aback when Buffett said in his latest letter to shareholders that he “bought more Apple than anything else” last year. The firm is now the second biggest holding in the Berkshire Hathaway balance sheet. It is interesting that Buffett said in an interview that he sees Apple as a strong consumer franchise rather than just a play on technological innovation. The gizmo maker has shown it can earn consumers who keep coming back for more.
Technology firms are always at risk of being blown away by the next innovation—think Nokia. Buffett seems to be now saying that brand loyalty is insurance even in the merciless tech world.