Last week we took a look at Warren Buffett’s current stock portfolio. Not only that, we also looked at what Berkshire Hathaway bought during Q1 of 2017. In other words, we looked at the businesses Buffett currently owns, and also, the ones he’s still buying. What this could mean for us is that he still believes they are currently undervalued.
What I want to do today is take a look at one of the positions Buffett added to, and see if it’s still on sale today.
As you can see in the title, I don’t want to pay more than $85.20 to own AAPL. I’ll explain why later in the post, but first let’s look at what Buffett currently added to, and then to an analysis on AAPL to figure out if it’s still a Great company. This is going to be a fun one!!
A reminder of what positions they added to.
Here again for your viewing pleasure, are the positions Buffett has added to…
As you can see above, They added to basically 5 positions:
AAPL - Apple Inc.
BK - Bank of New York
LUV - Southwest Airlines
AAL - American Airlines Group Inc.
SIRI - Sirius XM Holdings Inc. (plus 2 different classes of these shares)
Based on this list and the impact it has to the overall portfolio, I’d say that Buffett only participated in three of these purchases. Those three Purchases are:
1. AAPL
2. LUV
3. AAL
I say this because we know that Buffett started to buy airline stocks heavily last quarter, and has admitted to doing so. We also know that Buffett is behind the purchase of Apple stock, and has added to that position enormously in this last quarter. My guess (And I’m pretty sure it’s correct) would be that either Ted or Todd are behind the other two purchases that occurred last quarter, based on their impact to the overall portfolio.
Buffett tends to only make large, infrequent bets, and the purchase of BK and SIRI just don’t seem large enough positions to be Buffett or Munger. Based on this information, let’s stick to valuing Buffett’s picks.
The companies we’re going to Value
Today being valuation day, we’ll start our analysis with the largest position Buffett added to this last quarter, and work on the next two over the coming weeks (Don’t be in a rush here. Remember, Buffett usually buys with an extremely long outlook in mind. This means we can take our time to go over these businesses individually).
We’ll do valuations of
1. AAPL - Apple
2. LUV - Southwest Airlines
3. AAL - American Airlines
We’ll also look back at the portfolios of 11 amazing Investors we covered, and see if any of them tend to agree with Mr. Buffett.
This is going to be a fun one!
The 4 things we need to know before we make any investment
Warren Buffett, and especially his partner Charlie Munger, believe that there are really only four things we need to know before we can make any investment.
They are:
1. We must be capable of understanding the business
2. The business must have some durable competitive advantage that will give it strong economics for years to come.
3. We want an honest and trustworthy leader (Next level Leadership)
4. We can’t pay an infinite price for anything, so we want a large Margin of Safety built into our buy price.
These are most easily summarized as the 4 M’s (from Phil Town’s Rule #1 investing book)
1. Meaning
2. Moat
3. Management
4. Margin of Safety.
This is what we must know before we can proceed. If any of these don’t check the box, we should move onto a different investment idea.
Before you go
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