Warren Buffett Retires

Warren Buffett and Greg Abel (Tullo/WSJ)

94-year-old Warren Buffett will step down as Chairman of Berkshire Hathaway:

Buffett said Saturday at Berkshire’s annual meeting that he plans to step down as CEO at the end of the year and hand the reins to [Greg] Abel. In his 60 years of delivering stunning investment returns and folksy wisdom, the 94-year-old has been the glue that binds together Berkshire’s collection of businesses—from Dairy Queen and Duracell to railways and insurers—at a time when big conglomerates are out of style.

Abel will inherit the challenge of overseeing that wide-ranging empire, while living up to Buffett’s seemingly impossible-to-replicate record in stock picking—something even Buffett has struggled to do in recent years...

A former accountant from the Canadian Prairies who joined Berkshire through its acquisition of a utility in Des Moines, Iowa, Abel helped build Berkshire Hathaway Energy into one of the company’s biggest businesses through a series of acquisitions and investments.

By 2018, Buffett had seen enough to put Abel in charge of all of Berkshire’s businesses outside of its insurance operations and add him to the board. Abel now oversees dozens of companies, including Benjamin Moore, Fruit of the Loom, Oriental Trading and See’s Candies. Buffett still runs the bulk of the company’s investment portfolio and makes decisions on how to deploy capital.

We can dust off all the cliches--Greg Abel has big shoes to fill, Why There Will Never Be Another Warren Buffett--but one prediction is undoubtedly true: Greg Abel's strengths lie in operating Berkshire's many businesses; he will need assistance in making investment decisions.

Two lieutenants, Todd Combs and Ted Weschler, each manage a portion of Berkshire’s stock portfolio, and some Berkshire watchers expect them to take on a bigger investing role when Abel becomes CEO.

“I don’t see anything in [Abel’s] background that would make him a good stock picker. That’s not where he got his chops,” said Robert Miles, who teaches a class on Buffett at the University of Nebraska Omaha. “My guess is Greg will be in charge of major acquisitions and capital allocation, but the investment managers already in place will continue” to oversee the equity portfolio.

Bill Miller, the veteran stock picker, advised Abel to follow the advice Buffett has long dispensed to individual investors: “Put most of the excess cash in an S&P 500 index fund,” he wrote. “Then let Todd and Ted actively manage the residual.”

Warren Buffett Thinks Taxes are Going Up, and So Should You

The Berkshire Hathaway shareholders' meeting in Omaha last May.

Continuing its liquidation of Apple stock, Berkshire Hathaway sold a lot more in the third quarter: [bold added]

The Omaha, Neb., company ended September with $69.9 billion of the iPhone maker’s shares, according to a quarterly report released Saturday. That means Berkshire sold about 25% of the 400 million Apple shares it brought into the third quarter. Berkshire held slightly more than 900 million Apple shares at the end of last year.

Even after the sales, Apple was Berkshire’s largest stockholding at the end of September. Apple has been a major bet for Berkshire, and one that paid off big time as tech-hungry investors drove the stock ever higher in recent years.

This year, Berkshire has slashed the position, though Buffett has continued to praise the company. He told an arena of shareholders at Berkshire’s annual meeting in May that Apple was “an even better business” than American Express and Coca-Cola, two other big holdings, and hinted that tax considerations might have played a role in the decision to sell some shares.

Apple shares are up 16% this year and trading near records.

Market commentators generally have explained Berkshire's actions to be the result of portfolio-risk reduction (overconcentration in one stock) and the perceived over-valuation of Apple stock according to several metrics. However, the impact of higher corporate income tax rates after 2025 should not be underestimated in Warren Buffett's decision-making. Higher tax rates have a direct, immediate negative impact on cash flow, while portfolio diversification increases portfolio returns probabilistically but are not guaranteed.

Unless the Republicans make a clean sweep of the Presidency and Congress, tax rates are likely to go up. And even if the Republicans do win, the Grand Old Party still has traditionalists who are fiscally conservative. Higher-income taxpayers would be foolish not to take into consideration the likelihood of higher tax rates after 2025, and some are taking action now.

Among the moves investors might want to make if they are convinced taxes are headed higher is to sell stocks. Selling now would lock in capital gains at the current 20% top rate.

Kamala Harris proposes a new top capital-gains rate of 28% for high earners. She is also proposing to increase the investment income surtax. Although Donald Trump has campaigned on extending the 2017 law, taxpayers are also worried taxes could move higher if he wins, because of the nation’s finances and economy...

Potential changes to capital-gains taxes, more likely with a Democratic sweep, are prompting some taxpayers to sell stock or shares in a business. In addition to the higher capital-gains rate for those earning $1 million or more, Harris proposes increasing the 3.8% investment income surtax to 5% for taxpayers with income above $400,000.

Your humble taxpaying blogger may make some income-accelerating moves, such as converting traditional IRA moneys to a Roth IRA before year-end, but will wait till next year to take action after the election smoke clears.

Buffett to Apple: It's Not You, It's Me

The Berkshire Hathaway shareholders' meeting in Omaha last Saturday.

Apple stock has been Berkshire Hathaway's largest and most successful investment in Warren Buffett's storied history. [bold added]

Apple is Warren Buffett’s greatest investment. It has also become one of his riskiest.

In 2016, Buffett made perhaps the most surprising bet of his career. That year, Berkshire Hathaway, the company he runs, began buying up shares of Apple—the exact kind of stock Buffett and his longtime partner, Charlie Munger, had long avoided...

Yet working with protégés, Buffett soon transformed into an Apple bull in a remarkable about-face. After an initial purchase of nearly 10 million shares worth about $1 billion in 2016, Berkshire added to its holdings later that year and then stepped up its buying in 2017 and 2018, spending about $36 billion on the stock over those years. Berkshire later trimmed some of those holdings.

By the end of the third quarter of 2018, Berkshire’s Apple stake represented about a quarter of its entire investment portfolio. In dollar terms, it was twice as large an investment as Buffett had previously made.

The move has paid off, in a very big way. Today, Berkshire’s 5.9% stake in Apple is worth about $157 billion, even though Apple has fallen lately. Berkshire is sitting on about $120 billion in paper gains, likely the most money ever made by an investor or a firm from a single stock. Nothing in Buffett’s long career comes close. Apple stock represented nearly 50% of Berkshire’s stock portfolio at year-end.

Warren Buffett has never followed hard-and-fast rules for portfolio diversification. Many portfolio managers would sell an individual stock if its value exceeded, say, 10% of their portfolio, but Warren Buffett rode a seven-year wave until Apple equalled nearly half of Berkshire's $370 billion stock holdings.

At that point no one would criticize Warren Buffett for trimming his position, which he did in the first quarter. He announced his action in last Saturday's Berkshire shareholders meeting, all the while continuing to praise Apple:

Warren Buffett is still a big fan of Apple.

The legendary investor praised the iPhone maker on Saturday from the stage of his annual meeting, even after revealing that Berkshire Hathaway had slashed its stake in the first quarter. He hinted that tax considerations may have played into the decision.

Buffett told an arena of Berkshire shareholders that Apple is “an even better business” than American Express and Coca-Cola, two other big positions in his company’s massive stock portfolio.

Berkshire sold about 13% of its mammoth stake in Apple in the first months of 2024, leaving it with $135.4 billion of the iPhone maker’s shares at the end of March, according to a regulatory filing released Saturday morning.

He really didn't have to justify the sale, but what was the reference to "tax considerations"? Was there some esoteric tax rule that applied to unbalanced insurance company investments?

No, Mr. Buffett was simply referring to the likelihood that the Federal government, facing unprecedented deficits and unwilling to cut spending, will soon raise the long-term capital gains rate from 21%. (He elaborates on YouTube.)

We don’t mind paying taxes at Berkshire , and we are paying a 21% federal rate on the gains we’re taking in Apple. That rate was 35% not that long ago and has been 52% in the past when I’ve been operating. The Federal government owns a part of the earnings of the business we make. They don’t own the assets but they own a percentage of the earnings. They can change that percentage in a year and the percentage is currently 21%, and I would say that with the present fiscal policies I think that something has to give and I think that higher taxes are quite likely, and if the government wants to take a greater share of your income or mine or Berkshire’s, they can do it.

They may decide that someday they don’t want the fiscal deficit to be this large because that has some important consequences and they may not want to decrease spending a lot and they may decide they’ll take a larger percentage of what we earn, and we’ll pay it. We always hope at Berkshire to pay substantial Federal income taxes. We think it’s appropriate that a country that has been as generous to our owners—Berkshire was lucky that it was here—and if we sent in a check like we did last year, we sent in over $5 billion to the US Federal government—and if 800 other companies had done the same thing no other person in the United States would’ve had to pay a dime of Federal taxes [applause], whether income taxes, no Social Security taxes, no estate taxes, all down the line. I hope things develop well enough with Berkshire—we say we’re in the 800 club [companies with a market capitalization of at least $800 billion]-- and maybe even move up a few notches. It doesn’t bother me in the least to write that check, and I would really hope with all that America has done for all of you, it shouldn’t bother you that we do it, and if I’m doing it at 21 percent this year and we’re doing it at a lot higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year.

Far be it for me to argue with Warren Buffett, but his statement that no one would pay any taxes if 800 companies paid $5 billion to the Treasury is technically true, but fantastical. Excluding banks, who need multi-$billions to conduct operations, there are fewer than 50 companies that have at least $10 billion on hand. (It's like saying that if everyone had an EV there would be no climate crisis.)

However, the Oracle of Omaha is very likely to be correct in his prediction that the government is unwilling to cut spending and will raise taxes in the near future. At 93, Warren Buffett talks about the way things are, not the way he wishes they could be.

San Francisco: Signs of Optimism

The San Francisco turnaround that most people think of.

Politicians and other cheerleaders for the City have said that San Francisco's decline is over. They may just be right.

Tech Leaders Fled San Francisco During the Pandemic. Now, They’re Coming Back.

During the pandemic, scores of Silicon Valley investors and executives such as [Keith] Rabois decamped to sunnier American cities, criticizing San Francisco’s government as dysfunctional and the city’s relatively high cost of living. Tech-firm founders touted their success at raising money outside the Bay Area and encouraged their employees to embrace remote work.

Four years later, that bet hasn’t really worked out. San Francisco is once again experiencing a tech revival. Entrepreneurs and investors are flocking back to the city, which is undergoing a boom in artificial intelligence. Silicon Valley leaders are getting involved in local politics, flooding city ballot measures and campaigns with tech money to make the city safer for families and businesses. Investors are also pushing startups to return to the Bay Area and bring their employees back into the office.

Earlier this month Ian Jacobs, scion to the Toronto-based Reichmann real-estate dynasty and who studied under value investor Warren Buffett, sees opportunity in San Francisco office properties.

Jacobs has lined up commitments of $75 million for his first few deals, the people familiar with the matter said. Ultimately, he hopes to buy 3 million square feet of office space for prices about 70% below what it would cost to build the properties...

Jacobs has told investors it might take San Francisco 10 years to recover, according to his marketing materials. The key to the trade will be buying cheap and holding on until technology companies ultimately return.

Personally I hope San Francisco comes back. Much as I disagree with its governance, when the City sneezes everyone in the Bay Area catches a cold.

Sure, Warren, Easy for You to Say

Hats and no cattle? Hats for distribution at
Berkshire Hathaway's annual meeting.

"There's a sucker born every minute." --attributed to P.T. Barnum, circa 1860.

"Nobody ever went broke underestimating the intelligence of the American people."--H.L. Mencken, 1926.

“What gives you opportunities is other people doing dumb things...In the 58 years we’ve been running Berkshire, I’d say there has been a great increase in the number of people doing dumb things.”---Warren Buffett, May 6, 2023.

With all due respect to Warren Buffett and the managers at Berkshire Hathaway, the vast majority of people, including your humble blogger, 1) don't believe we're dumb like other investors; 2) don't recognize that our moves are dumb as we're doing them.

That's why most of us can't get Warren Buffett's results and should just buy index funds.

Klamath Tear-Down: Trust the Cost-Benefit Analysis

(Chronicle map)

California has dire need for both water and electricity. Hydroelectric dams provide both, and do so without producing carbon emissions. One would be hard pressed to find a more beneficial example of human engineering.

At first blush it doesn't make sense that four hydroelectric dams on the Klamath River will be torn down.

the largest dam-removal project in U.S. history is expected to begin in California’s far north next year.

The first of four aging dams on the Klamath River, the 250-mile waterway that originates in southern Oregon’s towering Cascades and empties along the rugged Northern California coast, is on track to come down in fall 2023. Two others nearby and one across the state line will follow.

Environmentalists and fishermen are eagerly anticipating the restoration of the Klamath chinook salmon run, which once totalled in the hundreds of thousands but is now 10% of that number. But the principal reason for the tear-down is that the cost of maintaining aging dams exceeds the benefit of electricity generation, and "the dams are not used for irrigation, municipal water or flood control."

The plan to raze the dams is the product of at least 20 years of debate over what to do with the river’s old and increasingly problematic infrastructure.

Owned by power company PacifiCorp, a subsidiary of billionaire Warren Buffett’s Berkshire Hathaway, the dams have long needed major upgrades, including fish ladders, which are believed to cost more than the dams’ worth as hydroelectric assets...

Despite the cost-benefit analysis, some residents are reluctant "to surrender any power source and [have] less water available for fighting wildfires." We just have to trust that Warren Buffett's company knows what it's doing, a good bet based on Mr. Buffett's past record of determining value.

Related: in 2018 Stanford University brought together environmental groups and hydropower interests, who are known for their vehement disagreements, to discuss how to generate more electricity while improving the health of rivers. They already can point to some successes.

Stock Market: Hold, but Buy Antacids

Gloom on 4/29, more declines on 5/2, cautious rise on 5/3, snapback on 5/4.

Gloom on Friday
The NASDAQ index closed last Friday, April 29th, with the worst showing of any month since the financial crisis year of 2008:

The broad selloff has erased trillions of dollars in market value from the tech-heavy gauge, with investors souring on shares of everything from software and semiconductor companies to social-media giants.

The Nasdaq dropped 4.2% Friday, bringing its losses for the month to more than 13%, its worst showing since October 2008. The index is down 21% in 2022, its worst start to a year on record.

The explanations were high inflation, the raising of interest rates by the Federal Reserve to cool off the economy, the COVID-19 lockdown in China, a possible expansion of the war in Ukraine, and lowered corporate outlooks.

Warren Buffett prepared to speak to Berkshire
shareholders this Saturday. (WSJ photo)

Buffett: Buying Opportunities
Though the gloom was palpable over the weekend, experienced hands began to see buying opportunities. Of course, none are more experienced and successful as Warren Buffett:

As recently as February, Warren Buffett lamented he wasn’t finding much out there that was worth buying.

That is no longer the case.

After a yearslong deal drought, Mr. Buffett’s Berkshire Hathaway Inc. BRK.B 2.45% is opening up the spending spigot again. It forged an $11.6 billion deal to buy insurer Alleghany Corp. Y -0.26% , poised to be Berkshire’s biggest acquisition in six years. It bought millions of shares of HP Inc. HPQ 3.88% and Occidental Petroleum Corp. OXY 3.93% And it dramatically ramped up its stake in Chevron Corp. CVX 3.14% , making the energy company one of Berkshire’s top four stock investments.

...While he finds speculative bets “obscene,” the pickup in volatility across the markets has had one good effect, he said: It has allowed Berkshire to find undervalued businesses to invest in again following a period of relative quiet.

Wednesday Snapback
Though the Federal Reserve raised the Federal Funds rate by 50 basis points, the market had been expecting worse. As soon as Chairman Jay Powell said that a 75-bp increase was off the table, the stock market took off:

Major indexes were at first little changed Wednesday after the Fed announced it would raise interest rates by half a percentage point and begin to shrink its $9 trillion asset portfolio next month. Investors had widely expected both decisions heading into the conclusion of the central bank’s policy meeting.

What caught some by surprise was Mr. Powell saying the Fed wasn’t “actively considering” raising interest rates by 0.75 percentage point at a future meeting. Federal-funds futures, which traders use to track interest-rate expectations, had previously shown the market pricing in a 95% chance of the Fed making such a move in June.

Stocks soared after Mr. Powell’s remarks, with the Dow Jones Industrial Average finishing up 932.27 points, or 2.8%, to 34061.06, marking its biggest one-day gain since November 2020. The S&P 500 jumped 124.69 points, or 3%, to 4300.17 for its best day since May 2020, while the Nasdaq Composite added 401.10 points, or 3.2%, to 12964.86.

There's always a possibility of negative surprises, but on balance I don't think apocalyptic scenarios are likely. I am holding on to my portfolio and am neither a buyer or a seller.

Applause Not Needed

(photo from NY Post)

Warren Buffett is the most successful investor in history. His knowledge of the stock market and financial analysis is unrivalled, but IMHO his wisdom concerning human nature and human behavior are equally important components of that success.

And it all stems from his empathy, i.e., the ability to put himself in another's shoes. The latter was on display when he said why he doesn't talk about politics in public, at least not any more. [bold added]

the CEO explained why he’s not speaking on politically charged topics — because doing so could affect Berkshire and the companies it invests in.

“I don't want to say anything that will get attributed basically to Berkshire, and have somebody else bear the consequences of what I talk about,” Buffett said.

“Why in the world do I want to hurt the people in that other room that do all kinds of things for Berkshire? Why do I want to hurt you? Because I say something that 20% of the country is going to instantly disagree with. And sometimes they will be so upset about us that they will try and…have campaigns against our companies.”

Michael Jordan expressed a similar thought 32 years ago. When he was urged to support the Democratic candidate in a Senate race, he said, "Republicans buy sneakers, too."

My mother asked to do a PSA for Harvey Gantt, and I said, 'Look, Mom, I'm not speaking out of pocket about someone that I don't know. But I will send a contribution to support him.' Which is what I did.

"I do commend Muhammad Ali for standing up for what he believed in. But I never thought of myself as an activist. I thought of myself as a basketball player.

"I wasn't a politician when I was playing my sport. I was focused on my craft. Was that selfish? Probably. But that was my energy. That's where my energy was."

They refrained from politics for different reasons: Michael Jordan didn't want to hurt his own brand, and Warren Buffett didn't want to hurt the people in Berkshire's businesses. Two other similarities: both men have shown enormous discipline throughout their lives, and neither craves the adulation of people who clap because they like their politics.

Managing Risk When The Odds Are in Your Favor

Even he is not always right (Apple Insider photo)

In my novice investor days I would always bet too much on a story stock. Usually that stock would already have been bid up, and I was one of the last suckers buyers before the fall.

But even when I became a decent stock picker I still tended to put too much in one basket. Even the best investors in the world don't hit it out of the park 10 out of 10 times; experience has taught them how to manage portfolio risk even though they're right more often than not.

The WSJ has a simple baseball simulation game in which the player wins 57% of the time and gets paid 1 for 1; if it were a true game he would have to bet nearly $3 to win $2. He has a $100 stake, and there are 10 rounds of bets. What is the strategy? (Test yourself by clicking the link above.)

"NASDAQ is Nuts"

You would comply if your Zoom board meetings looked like the above  (alderkoten image)

NASDAQ has proposed a diversity rule for corporate boards of directors: [bold added]

the rules would require most Nasdaq-listed companies to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. Foreign companies and smaller reporting companies would have additional flexibility in satisfying this requirement with two female directors.

An "underrepresented minority" is defined as "Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, [or] two or more races or ethnicities."

Companies may be excused from compliance by "explaining their rationale for not meeting that objective", but it's probably easier not to get on the wrong side of the woke crowd. Just add a board seat or two and fill it with someone who checks the appropriate boxes. Your humble blogger qualifies to be in this group and respectfully raises his hand to be included in this gravy train necessary correction to the long-standing biases of corporate America.

The WSJ editorial board lets Warren Buffett, the greatest investor in American history, do the talking: [bold added]

The more we think about the new racial, gender and LGBTQ mandates for corporate directors that Nasdaq announced on Tuesday, the more absurd they seem.

How is a company supposed to find out if a board candidate is gay if that isn’t already known? Is it supposed to hire private detectives to look into it? Once that person joins the board, does the company then have to broadcast his or her sexual orientation in the annual report so progressives can be satisfied that the quota is met? We could go on.

For a dose of sanity, we thought readers might enjoy Warren Buffett’s views on what he looks for in a director. The following is from the legendary investor’s 2006 letter to shareholders in Berkshire Hathaway’s annual report:

“In selecting a new director, we were guided by our long-standing criteria, which are that board members be owner-oriented, business-savvy, interested and truly independent. . . .

Can't we all just get along?

“Charlie [ Munger, Berkshire vice chairman] and I believe our four criteria are essential if directors are to do their job—which, by law, is to faithfully represent owners. Yet these criteria are usually ignored. Instead, consultants and CEOs seeking board candidates will often say, ‘We’re looking for a woman,’ or ‘a Hispanic,’ or ‘someone from abroad,’ or what have you. It sometimes sounds as if the mission is to stock Noah’s ark. Over the years I’ve been queried many times about potential directors and have yet to hear anyone ask, ‘Does he think like an intelligent owner?’

“The questions I instead get would sound ridiculous to someone seeking candidates for, say, a football team, or an arbitration panel or a military command. In those cases, the selectors would look for people who had the specific talents and attitudes that were required for a specialized job. At Berkshire, we are in the specialized activity of running a business well, and therefore we seek business judgment.”

Nasdaq is nuts.

Another Sign That Newspapers Are Dead

I love newspapers, though there are problems with any individual name--similar to Linus' saying, "I love mankind, it's people I can't stand"--sorry for the digression. I spend over $500 annually on newspaper subscriptions and hundreds more on print magazines. I am also a dinosaur.

Another dinosaur, Warren Buffett, is also a newspaper lover and invested in them, probably more with his heart than his head. Today he announced that he is getting out of the business.

Warren Buffett tossed a newspaper in 2016.
In 2020 he will toss the business (WSJ photo)

Warren Buffett’s Berkshire Hathaway Inc. is selling its newspapers to publisher Lee Enterprises Inc. (ticker: LEE) for $140 million, a rare admission by the billionaire investor that he views his newspaper business as unsustainable.

Mr. Buffett, a lifelong newspaper lover, has said for years that Berkshire’s newspaper business declined faster than he expected. In mid-2018, Berkshire hired Lee to manage all of its newspapers except the Buffalo News.

The sale announced Wednesday includes the Buffalo News along with the dozens of newspapers that Lee already manages for Berkshire, Lee said.

...Berkshire’s newspapers have already shrunk considerably. The newspaper division and the Buffalo News employed 3,685 people at the end of 2018, down from 4,337 a year earlier, according to Berkshire’s annual reports.

Mr. Buffett’s decision to exit from the newspaper business underscores the widening divide in media between the handful of large, national players, including The Wall Street Journal, the New York Times and the Washington Post, and chains of smaller papers.

If even patient Warren Buffett has given up, then it's further evidence that only the big national and a few regional titles will survive.

Bringing it down to a personal observation, the kids won't read the free-to-them issues on the table, so they certainly won't pay for a subscription.

A couple of paragraphs caught this accountant's eye: [bold added]

As part of the sale, Berkshire is lending Lee $576 million at a 9% annual rate. Lee will use the money to pay for the acquisition, refinance its $400 million in existing debt and close its current credit facility, making Berkshire its only lender.

Berkshire’s deal with Lee is expected to close in the middle of March. Lee also said it is going to enter into a 10-year lease agreement for the media group’s real estate at an initial cost of $8 million a year.

Whenever a seller provides loans, leases, and other financial support to a weaker, smaller buyer, revenue-recognition rules come into play. If there's a significant probability that the buyer can't perform and assets and liabilities will revert to the seller, then the sale of the business is not recognized. I'm sure Berkshire Hathaway's financial advisors have vetted the sale; I'm just noting the eagerness with which Berkshire wants to go through with it.

Another Five Years

Five years ago, a year and a half after Steve Jobs' death, Apple's stock was in the doldrums. A post from April, 2013:

There's no question that the past year has dissipated the aura of coolness that surrounded the ownership of Apple products or Apple stock. Last year's "new" product releases represented incremental improvements--some features were impressive, to be sure---but, alas, the revolutionary, industry-changing devices that were supposedly in the pipeline when Steve Jobs died appear to be a figment of the biographer's imagination.

Your humble observer is a long-time holder of AAPL and, like other investors, has been disturbed by the stock's 28% drop in price over the past year and 42%(!) fall from the $705 all-time high of last September.

When the above lament was written, AAPL was selling for $406.13 per share, the equivalent of $58 after 2014's 7-to-1 split. Over the next five years Apple has tripled to close at $188.59 last Friday. The biggest company in the world has substantially outperformed the S&P 500 and NASDAQ indices (see chart below) during that period.

Before the May 1st earnings announcement the analysts were saying the same thing as they did in 2013: Apple is a hardware/iPhone company, it hasn't come up with anything revolutionary since Steve Jobs died, and its growth prospects are lower than those of tech giants Google, Amazon, and Facebook.

As expected, iPhone sales did fall from the December quarter, though they did manage to increase from the same quarter last year. However, three bright spots more than made up for any disappointment from the iPhone.

Cash returned to shareholders.

Apple’s $100 billion share-repurchase plan is the largest ever announced by a U.S. company, according to data from research firm Birinyi Associates. Apple said its board also approved a 16% increase in its quarterly dividend. That put it on track to spend $14.82 billion a year in dividends, making it the largest dividend payer, according to S&P Dow Jones Indices.

Services revenue.

The services business has become one of Apple’s biggest growth engines, with revenue in its last fiscal year rising 23% to $30 billion. Apple aims to lift that number to $50 billion by 2020.

The company has 1.3 billion iPhones and other devices in active use and earns an estimated $30 per device on music subscriptions, app store purchases and other services, according to Morgan Stanley, which expects services to account for about 60% of Apple’s revenue growth over the next five years.

Berkshire Hathaway bought more shares.

(CNN Money image)

75 million--That’s how many more shares of Apple that Warren Buffett bought in the first quarter of this year, adding to the almost 170 million shares that Buffett-run Berkshire Hathaway owned at the end of 2017. “It is an unbelievable company,” Buffett said in a CNBC interview, and investors responded by pushing Apple up about 4 percent Friday, closing at a record $183.83.

Apple's still growing, and its cash-generating ability has risen with the 2017 Tax Cut and Jobs Act. If the 87-year-old Warren Buffett can buy more shares, then I'll show a little faith by holding on to mine for another five years.