Apple’s stocks have successfully recovered after the recent market downturn, yet the fact that Warren Buffett chose to decrease his ownership in the company by half might have alarmed some investors. Although Buffett still maintains a considerable investment in Apple, he attempted to benefit from the reduced capital gains taxes (currently at 21 per cent as opposed to 35 per cent a short time before) ahead of the US elections, which required him to make some profit.
Regardless, today’s appraisal of Apple is significantly unlike the time when Buffett first invested in the company back in 2016, as observed by Charlie Bilello, a strategist at Creative Planning. The price-earnings ratio of Apple has surged from less than 10 to more than 30, and its price-sales ratio has escalated from two to nine – the peak in the company’s history.
Seen in another perspective, Apple’s stock price increases over the previous ten years (859 per cent) have “considerably outstripped its basic growth” (an increase in revenues by 111 per cent). Bilello’s point is that a value-minded investor such as Buffett would have undeniably spotted that Apple is no longer a bargain – quite the contrary.