Buffett & Munger Sound Off on Apple, Bitcoin, Gold, and Elon Musk

We're dedicating this week's Stock Up to the juiciest, most actionable bits. ------------------------------------------------------------------------------------------------------------------------------------------------------ [View this email in your browser]( Long before there was such a thing as an [Ask Me Anything subreddit]( Warren Buffett and his partner Charlie Munger would answer any question for hours at a time each year at the Berkshire Hathaway ([NYSE:BRK-A]( ([NYSE:BRK-B]( annual shareholders meeting. That [happened again last weekend]( followed by a [CNBC appearance]( on Monday. We're dedicating this week's Stock Up to the juiciest, most actionable bits. – Anand Chokkavelu, CFA, Managing Editor of Fool.com TWITTER POLL OF THE WEEK --------------------------------------------------------------- [Twitter Poll: Which would you choose, under the caveat that couldn't sell for 10 years?]( [Vote and See Results]( On the Staggering Amount of Apple Stock Berkshire Hathaway Now Owns --------------------------------------------------------------- Buffett recently announced that [Berkshire had purchased]( about 75 million additional shares of Apple ([NASDAQ:AAPL](. This was in addition to Berkshire's already-massive stake, and it results in the company owning more than 240 million shares of the iPhone maker — about 5% of the total, or roughly $45 billion as of this writing. Buffett thinks of Apple, with its strong brand and ecosystem, as more of a consumer goods company than a tech company at this point. To wit: "I would say that — incidentally that the iPhone — you know, has a terrific moat." While Apple is now Berkshire's largest stock investment by far, it's possible Buffett's not done. In the CNBC interview he said he likes Apple so much that he would love to own all of the company's stock (a standard test he uses). "We bought about five percent of the company. I'd love to own 100 percent of it." Munger echoed Buffett's viewpoint. "I wish we owned more of it ... I think we've been a little too restrained." Finally, for some perspective on why they're betting so big on Apple, Buffett notes, "There are some others that — that are much smaller companies we just can't buy that much. I might like them equally as well, but I can't put as much money in it. But I clearly like Apple." --------------------------------------------------------------- Another amazing number: Since Apple's about twice the size of Berkshire Hathaway, Berkshire's 5% stake means its Apple shares make up a whopping 10% of Berkshire's market cap. --------------------------------------------------------------- What Buffett Thinks About Bitcoin It's been no secret that Buffett is a harsh critic of [cryptocurrencies like bitcoin]( so it's not much of a surprise that when asked about it at the annual meeting, Buffett restated these views. He said, "Cryptocurrencies will come to bad endings." As an investment, Buffett feels cryptocurrencies don't make sense because they don't produce anything (in the sense that stocks produce earnings, bonds produce income, farms produce crops, etc.) and because they have no intrinsic value. Buffett believes the only force that's fueling cryptocurrency prices is the idea that investors will be able to sell it at a higher price. Munger equated bitcoin to "rat poison" to which Buffett said, "Well, it's probably more like — rat poison squared." --------------------------------------------------------------- What a productive asset looks like: Berkshire companies earn about $400 million each week! --------------------------------------------------------------- Why Buffett Continues to Hold Wells Fargo Despite Its Scandals Buffett and Munger have held up Wells Fargo ([NYSE:WFC]( as one of the greatest banks in the country ever since Berkshire took a stake back in 1989. Berkshire owns about 10% of the bank often described as "America's largest community bank," making it the second-largest holding behind Apple. But Wells Fargo's recent scandals — [opening accounts]( customers didn't authorize, [charging for insurance]( its customers didn't need, among others — have tarnished its reputation. Many investors worry that the bank's earnings power is diminished, given that its fee-based businesses that fueled its outsize profits were at the center of the scandals. Buffett doesn't view Wells as being any worse after the scandals than before. In fact, he argued that it may be better off when the dust finally settles. "I see no reason to think that Wells Fargo — going forward — is other than a very, very large well-run bank that had an episode of its history. GEICO came out stronger, American Express came out stronger," Buffett said, referring to each company's performance after large missteps in their corporate histories. "All the big banks have had troubles of one sort or another and I see no reason why Wells Fargo as a company, from both an investment standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes," he said. He went a bit further on CNBC: "But I think ten years from now, I think if you look at the ten-year record of Wells Fargo ten years from now you will — you're very likely to find that it outperforms most of its competitors." Of course, investors may dismiss Buffett's upbeat tone as talking his book, but given he's one of the greatest [bank-stock investors]( ignoring his opinion outright could be folly. --------------------------------------------------------------- A critical Munger line: "Part of the Berkshire secret is when there's nothing to do, Warren is very good at doing nothing." --------------------------------------------------------------- Warren Buffett on the Power of the Stock Market vs. Gold Buffett recounted the story of how he bought his first stock on March 11, 1942 — at age 11. He then asked people at the conference to consider how much money they thought they'd have today if, at the time Buffett had bought his first shares, they had bought $10,000 worth of the S&P 500 stock index and held onto it until now. The answer: a staggering $51 million. He then asked investors how much money they thought they'd have today if they'd bought gold — arguably the best proxy for an investment type that people who are worried about political or economic woes buy — instead of stocks with that same $10,000. The answer: about $400,000. The 100 times plus outperformance of stocks versus gold was made possible by the fact that companies continually reinvest their profit to produce inventions that result in greater growth in the future. Undeniably, there have been plenty of reasons to sell U.S. stocks (war, political unrest, economic recession) over the past 75 years, but ultimately, the investors who have made the money have been those investors who've bet on American economic prosperity, rather than doom and gloom. Buffett is chief among them, having bought that first stock during a particularly bleak period of World War II. --------------------------------------------------------------- Top 5 candies by sales in the U.S. (this'll make sense in a minute): 1) M&M's 2) Reese's Peanut Butter Cups 3) Hershey's bar 4) Snickers bar 5) Orbit gum --------------------------------------------------------------- FEATURED PODCAST --------------------------------------------------------------- [Motley Fool Industry Focus]( Warren Buffett vs. Elon Musk: Who's right? Last week, tech mogul Elon Musk shared his bearish view of competitive moats, spurring a response from Warren Buffett, who coined the term a couple decades ago. The back-and-forth featured a lot of talk about candy moats... [Subscribe on iTunes]( In next week's Stock Up email... We'll aim for zero mentions of Warren Buffett! In the meantime, if you're still not tired of Buffett, read more [here]( and [here](. Join the 1,300,000+ people who follow us! [Twitter]( [Facebook]( We work fervently, feverishly, and Foolishly to make sure all the facts and figures we publish in our emails are 100% accurate and up to date. Our mailing address is: The Motley Fool | 2000 Duke St. | Alexandria, VA 22314 Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](. This is a promotional message from The Motley Fool Copyright © 1995-2018 The Motley Fool. All rights reserved. [Legal Information.](