VALUE: After Hours (S07 E34): Apple as Buffett’s Greatest Trade

During their recent episode, Jake Taylor and Tobias Carlisle discussed Apple as Buffett’s Greatest Trade. Here’s an excerpt from the episode:

One of the opening stories in the book, is talking about Apple, and contrasting Einhorn and Icahn, and their activist campaign against Apple with Buffett’s subsequent investment in Apple to show the difference between the two approaches. And I say that Buffett’s approach is a better example of a Sun Tzu style strategy, which I think a lot of people will not expect, because I think that a lot of people think of Sun Tzu. The book is called The Art of War. It sounds like this very martial, aggressive philosophy.

When I think in actual fact, it’s not really that philosophy. They say, it’s a book of peace. This is part of the philosophical tradition that it comes from, but I think that illustration– I think that when I say that I think that Apple is the greatest trade ever, because Buffett puts so much capital to work in absolute terms. It was such a large portion of Berkshire Hathaway or Berkshire Hathaway’s investable assets. The downside was minimal and the upside was extraordinary, and then it was a four bagger plus. And at some point, it was more impactful to Berkshire Hathaway’s returns than any other investment in very short order.

Jake: And it was out there for anybody to have done it, right?

Tobias: Anybody could have put that on because it was publicly traded. Everybody owned an iPhone, or an iPad, or a laptop or knew who Steve Jobs was or had an iPod. It was in the public consciousness. Everybody knew about it. Anybody could have done it. As opposed to the–

Jake: I caught this biotech when it was, you know, [chuckles] no one had ever.

Tobias: What’s the South African investment into the Chinese company that–

Jake: Yeah. Into Tencent.

Tobias: Tencent.

Jake: It’s Naspers.

Tobias: Naspers. Thank you. I think that’s also a very, very impressive deal. You’ve got to go to the South African stock market to find a Chinese investment. Nobody knew who Naspers was before they did that, whereas Buffett was very well known before he did the Apple deal. And so, I think that that’s really the best example of something where it really was skill rather than–

There is some luck, of course, to get the return that he did, but it was skill to put that all together. And so, I wanted to go through, and describe why and what qualities Sun Tzu talks about for his generals and for strategy and how that was exemplified in the Apple deal and other things that he did.

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