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Berkshire Hathaway adds to Apple stock position

Berkshire Hathaway, the publicly traded conglomerate that is run by legendary investor Warren Buffett, recently disclosed that they increased their investment in Apple by 55%. This increase in their investment comes at a time when many others are running away from Apple stock due to a plethora of challenges the company is facing.

Apple is in some ways a victim of their own success having risen to be the largest company in the world and stockpiling massive cash reserves in the process. Apple has also penetrated deeply into the cell phone, tablet, personal computer, cloud storage, and watch markets with success. However many feel as if they have saturated the market and their avenues for growth have all but disappeared.

On the positive side, and what may be fueling the investment by Berkshire Hathaway, is a major cell phone upgrade cycle which is expected to begin in 2016/207. Many market observers believe that their decline in sales in the first half of 2016 is due to iPhone buyers holding off from buying phones due to a concern that the new model will be released by year end.

Still Apple is increasingly facing new competition and market challenges domestically and abroad. One of the biggest challenges is in China the second largest market for Apple which has introduced lawsuits against Apple for pirating a local manufacturers phone, and which is also experiencing slowdowns of their own. Some market observers are calling Apple a stock that should be avoided and claiming that anyone investing in it at these prices to be oblivious to the trends.

Apple has had its height of revenue and earnings in 2014 and is experiencing a come down from this height. For Buffett’s company they only own 15 million shares which is not a major investment for the firm and the investment was likely made by one of his lieutenants and not Warren himself. Apple stock has increased over the past quarter by about 20% but this was mostly catch up after a tough first half of the year.

Whether Apple stock ends up being a bargain or a value trap is to be determined, but Buffett is far from blind to the market’s ways, even when it is not immediately obvious to other market observers.