There are countless reasons to invest in Apple‘s (NASDAQ: AAPL) stock, but Warren Buffett’s faith in the tech company is one of the big ones. Since the investing star first bought the stock in 2016, its shares have shot up 424%. The consistent growth led Buffett’s holdings company Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) to make Apple 38% of its portfolio, by far the biggest portion. Comparatively, the company’s second-biggest holding is Bank of America at 10.5%.
In the first three weeks of the new year, Apple shares have been gradually rising, up 8.6% year to date. However, the stock is still down 13.1% year over year. Now is an excellent time to invest in this resilient and reliable company.
Here’s one Warren Buffett stock to buy in 2023 and hold forever.
Apple is maximizing iPhone profits
Last year ended sourly for Apple, with its stock plunging 12% in December 2022. The fall was primarily fueled by concerns over the company’s dependency on China for its iPhone production after increased COVID-19 restrictions put strains on the factory, which produces about 70% of iPhones. The stock has since recovered some, with production back to 90% capacity. However, other developments see Apple securing its future over the long term.
The iPhone accounted for 52% of Apple’s revenue in 2022. While the company has other quickly growing segments, such as a booming services business, the iPhone is still its biggest asset and a compelling avenue to attract consumers to its other offerings. Thus, Apple’s recent moves toward boosting iPhone profit margins are promising.
Since the start of 2023, Bloomberg has released multiple reports that Apple is working toward reducing its reliance on other tech companies. For instance, on Jan. 9, the publication revealed Apple will swap Qualcomm‘s telecom chips in the iPhone with in-house versions and will do the same with Broadcom‘s Wi-Fi and Bluetooth chips.
Moreover, Bloomberg reported on Jan. 11 that Apple will shift away from using Samsung and LG iPhone displays as early as 2024 in favor of its own custom-designed screens. The move will allow Apple to boost profits by ending costly partnerships with these companies. Because the tech giant already uses in-house chips, screens are the single most expensive iPhone component, making the decision to move to custom versions lucrative for operating income.
Apple is expanding in other markets
In addition to optimizing iPhone profits, Apple is adding another layer of protection to its business by diversifying its revenue to lessen its smartphone dependency.
According to Grand View Research, the online on-demand home services market was worth $3.7 billion in 2021 and will grow at a compound annual growth rate (CAGR) of 16.7% through 2030. And Apple is in a prime position to profit from that growth with its subscription-based services, Apple TV+, Music, Fitness+, News+, Arcade, and iCloud.
In fact, the company is already enjoying revenue boosts from the industry, with services revenue rising 14% in 2022, double iPhone growth. Meanwhile, services hit a 71.7% profit margin compared to products’ 36.3% profit margin.
Additionally, Apple reportedly has plans to venture into the augmented and virtual reality (AR/VR) markets in 2023 with the launch of a new headset. The coming device is promising, as the VR market was worth $21.8 billion in 2021 and will grow at a CAGR of 15% until at least 2030. Furthermore, the AR market is worth $25.33 billion and is expected to see a CAGR of 40.9% in the same period.
Apple is home to some of the world’s most in-demand products; it’s not surprising it’s one of Buffett’s top stocks. The company has provided investors with consistent growth over the long term, making it a stock you can buy now and hold forever.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Dani Cook has positions in LG Display. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Qualcomm. The Motley Fool recommends Broadcom and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.