Why does Warren Buffett love Apple and hardware tech? One analyst may have the answer
Eric Francis

It's no secret that in the past, Warren Buffett and Berkshire Hathaway (BRK.A) (NYSE:BRK.B) eschewed investing in technology stocks.
But in recent history, that mantra has changed, with the conglomerate making sizable investments in companies such as IBM (NYSE:IBM), HP (NYSE:HPQ), Taiwan Semiconductor (TSM) and probably most notably, Apple (NASDAQ:AAPL).
While some of the positions have worked out well for Buffett and Berkshire - namely Apple (AAPL) - others, like IBM (IBM), haven't. And with the jury still out on HP (HPQ), Bernstein analyst Toni Sacconaghi wondered why, after so many years, has Buffett decided to move into technology.
The likely answer is that all three companies "nicely fit" several of Buffett's key investment narratives: the group has leading positions and share, recognizable brands, strong capital return programs and "reasonable" valuations.
While all of that may be seen in both foresight and hindsight, it's fair to wonder why has Apple (AAPL), which is Berkshire Hathaway's (BRK.A) (BRK.B) largest position by far, worked out so well for Buffett, while the others haven't.
Sacconaghi believes it comes down to the fact that Apple (AAPL) is a "leverageable consumer brand." The Tim Cook-led company has moved outside of its core hardware products into other markets such as streaming music, movies, financial services and cloud storage, and has built a "high margin" services business.
Some analysts believe more than half of Apple's (AAPL) $2.5T market cap could be tied to its venerable services business, which includes the App Store, Apple Music, Apple TV+, Apple Pay, iCloud and more. As of the end of its fiscal 2022, Apple (AAPL) had more than 900M subscriptions to its various services offerings.
Conversely, IBM (IBM) does not have anything similar, and wound up falling behind in a seismic shift in the technology industry, the push into cloud computing, Sacconaghi explained. IBM has made inroads into the massive market, but it still lags far behind Amazon (AMZN) Web Services, Microsoft (MSFT) Azure and Google's (GOOG) (GOOGL) Cloud Platform. 
Regarding HP (HPQ), Sacconaghi said it's possible Buffett thinks the company is more like Apple (AAPL) than IBM (IBM). It's also possible that a shift in technology, including moving away from printed pages, "risks undermining HP's earnings power, akin to what happened with IBM," Sacconaghi added, pointing out that switching barriers in HP's core business is not like switching from iOS.
For now, Sacconaghi said it's unlikely that Buffett "materially" adds to his position in Apple (AAPL) at its current levels. Apple (AAPL) currently accounts for roughly 40% of Berkshire's (BRK.A) (BRK.B) stock portfolio, and the legendary 92-year-old Buffett has been an "extremely disciplined" buyer of the stock, buying when the shares have traded at less than 20 times earnings and selling at greater than 25 times earnings.
Earlier this month, investment firm Morgan Stanley said Apple (AAPL) has five "underappreciated" catalysts that could boost the stock higher over the next 12 months.
Seeking Alpha's Quant system recently listed Berkshire Hathaway (BRK.A) (BRK.B) as one of three strong buys in the financial sector.