As markets continue to rise, Warren Buffett is raking in the cash. As well, his holding firm, Berkshire Hathaway likely posted a $50 billion profit in 2020 through a single stock.
This amazing stock is actually a rare bet. Buffett usually doesn’t invest in companies like this. But right now, the position is worth around $125 billion, nearly half of his entire equity portfolio.
This is his top stock
Despite avoiding tech for decades, Buffett built a huge position in Apple over recent years.
“The famed investor’s company plowed about $35 billion into the iPhone maker between 2016 and 2018, securing a roughly 5.5% stake,” Business Insider reports.
Apple’s stock price surged in 2020, delivering record gains for Buffett. “That would represent a $50 billion gain on the holding in 12 months, and a roughly $90 billion or 250% gain on its original wager,” Business Insider concludes.
Apple, of course, is one of the world’s largest providers of smartphone and computer hardware. But recently, it’s made a huge push into software and services. This evolution is likely what has Buffett deeply invested.
In 2019, Bloomberg revealed that Apple is attempting its “biggest strategy change since the iPhone in 2007.” That shift is turning the company into a software juggernaut. That comes with significantly higher profit margins, stickier revenue streams, and greater power over the end customer.
After all this time, the Oracle of Omaha is now a huge proponent of software stocks. There’s one stock in particular that he could buy next.
Buffett could buy this stock next
If software stocks are the future, look no further than Shopify (TSX:SHOP)(NYSE:SHOP). To be clear, this stock isn’t starting from scratch. Its market cap exceeds $100 billion, with shares delivering a 4,000% gain since 2015.
But these factors actually work in favour of attracting Buffett’s attention. With such a massive portfolio, he can only take meaningful positions in businesses with large market caps. Shopify certainly fits the bill.
In fact, Shopify is much further along the software journey than Apple given that it was never involved with hardware in the first place. The company created an e-commerce platform to enable retailers to create their own digital shops in minutes, complete with inventory tracking, payment processing, and more.
Right now, Amazon controls a huge chunk of the digital retail market, but the majority of dollars are still spent elsewhere. Shopify owns the software that underpins those Amazon alternatives.
Buffett now understands the economic model of software businesses. They can grow faster and larger than nearly any hardware alternative. Buffett already owns Amazon stock, so he knows the space well. Expect him to pick up shares of Shopify, perhaps as early as this year.
Don’t stop here
Buffett already owns Amazon and Apple, and I suspect that he could own Shopify shares before the year is finished. But that’s not the end of the line. Berkshire Hathaway is sitting on a record pile of cash, capital that will be deployed sooner rather than later.
Following Buffett is a shortcut to investing success, and right now, predicting his next move should prove profitable.
We think Buffett is getting ready to buy the stocks on our FREE list below.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon and Apple. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Shopify, and Shopify and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), long January 2022 $1920 calls on Amazon, short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2023 $200 calls on Berkshire Hathaway (B shares), and short January 2022 $1940 calls on Amazon. Ryan Vanzo has no position in any stocks mentioned.