How to approach advanced value investing the Warren Buffett way
Follow a real-life play-by-play example of how Warren Buffett generated a 5x gain on his investment in Apple.
Warren Buffett is widely regarded as the greatest value investor of all time. His approach is simple: buy exceptional businesses at fair prices and hold them for the long term. What sets him apart is not only discipline, but adaptability – knowing when to bend without breaking his principles.
Apple ($AAPL) is the perfect case study. After avoiding tech stocks for decades, Buffett made Apple Berkshire Hathaway’s biggest bet in 2016. He didn’t suddenly become a gadget enthusiast – he recognised Apple as a consumer powerhouse with loyal customers and dependable cash flows.
The investment shows two things: timeless value principles still apply in modern markets and Buffett can adapt while staying true to his framework.
Let’s break down Buffett’s approach to AAPL step-by-step to show how value investing plays out in the real world.
You won’t have access to Buffett’s data or billions in cash, but if you’re serious about value investing, here’s some advanced strategies to note.
Why did Warren Buffett make a contrarian bet on Apple?
When Berkshire Hathaway first disclosed its Apple stake in 2016, investors were puzzled. iPhone sales were slowing, China revenues were under pressure and analysts warned Apple’s growth was peaking.
Berkshire’s initial purchase, disclosed in May 2016, was about 9.8M shares (or 32.9M shares after a four-for-one split in 2020) worth just over US$1B (or more than US$4B after the split).
The stake swelled to about 1B shares in Q3 2018 before being trimmed between 2018 and 2020. Berkshire resumed buying in 2022 and by 2023 its position peaked at over 900M shares, valued at around US$170B.
🎓 Learn more: How to tell if a stock is undervalued or overvalued?→
What numbers was Warren Buffett looking at when he bought Apple stock?
When Buffett’s team began buying in Q1 2016, the most recent annual accounts available were Apple’s 2015 results.
It painted a picture of a company with scale, a fortress balance sheet and strong cash flows.
Here’s what may have caught Buffett’s eye:
Return on Equity (ROE)
Apple 2015: Net income of US$53.4B ÷ shareholder equity of US$119.4B = 45%
Why it mattered: An ROE above 15% is rare. Apple’s 45% was extraordinary.
Operating Margin
Operating income of US$71.2B ÷ revenue of US$233.7B = 30%
Why it mattered: At Apple’s size, a 30% operating margin showed brand strength and pricing power.
Debt-to-Equity
Long-term debt of US$53.5B ÷ shareholder equity of US$119.4B ≈ 0.45
Why it mattered: Conservative leverage plus a cash pile meant little balance-sheet risk.
Free Cash Flow (FCF)
Operating cash flow of US$81.3B - capex of US$11.2B = US$70.1B
Why it mattered: Free cash flow, not accounting profit, showed Apple’s financial strength.
🎓 Learn more: How to research stocks?→
What is Apple’s competitive moat?
Buffett loves moats – a lasting competitive advantage that keeps customers loyal and competitors at bay. That was true of Coca-Cola in the 1980s, and in 2016 it was just as true of the iPhone.
The iPhone wasn’t just a product: it was the centre of a customer’s digital life. Once you bought one, you were likely to add an Apple Watch, AirPods, a Mac or iPad, and to pay for services like iCloud, Apple Music, or Apple Pay.
Each purchase pulled you deeper into the ecosystem, and upgrading your iPhone every few years became a habit. Buffett saw that loyalty as the modern version of brand longevity.
Apple’s moat meant predictable cash flow, pricing power and a business model that could compound for decades.
That’s exactly the sort of edge Buffett has always looked for – whether in a chocolate bar, a can of Coke, or the world’s most popular consumer technology franchise.
What was the margin of safety in Warren Buffett’s purchase of Apple stock?
Buffett’s guiding principle is the margin of safety: only buy when the price is well below intrinsic value.
Apple shares traded around US$90 in early 2016 – about US$22 on today’s split-adjusted basis after the 2020 four-for-one split – giving Apple a price-to-earnings ratio of around 12x.
In contrast, the S&P 500 was closer to 20x.
Apple’s low valuation in 2016 implied the market believed its earnings power was fading. But Apple was compounding value through cash flows, buybacks, and customer loyalty.
Even under pessimistic assumptions, the stock was undervalued. Better still, Buffett was able to buy on a PE multiple in the low teens.
That misalignment - perception versus reality - gave Buffett his opening.
How much money did Warren Buffett make from buying Apple shares?
The payoff from Buffett’s bet is undeniable – Apple delivered financially and so did the share price:
FY24 revenue: US$391B (up from US$233.7B in 2015)
FY24 net income: US$93.7B (up from US$53.4B)
FY24 operating cash flow: US$118B (up from US$81.3B)
FY24 operating margin: 30% in 2015 vs 32% in 2024
Buybacks: US$94.9B in 2024 alone, part of more than US$600B since 2016
Apple’s share price performance is just as striking. From an average of US$24.91 in Q1 2016 to US$232 by August 2025, Apple delivered a compound annual return of around 26% – far ahead of the market.
If anything, Buffett’s thesis wasn’t just correct – it was conservative. Apple grew earnings, maintained enviable margins, and returned unprecedented amounts to shareholders. For Berkshire, its ownership stake grew steadily, even without buying more shares.
Why did Warren Buffett sell Apple stock?
In late 2023, Berkshire started selling. In Q4 2023 it started trimming Apple. By 2025 it had cut the stake by around 70%.
Why make this move? Apple shares were trading at more than 30x earnings, a far cry from the 11-12x multiple Buffett first bought.
For a value investor, that re-rating meant much less margin of safety. Analysts saw a classic Buffett discipline – taking profits after a huge run – rather than a loss of conviction.
Apple still remains Berkshire’s single largest equity holding, worth over US$60B. Berkshire spent around US$40B acquiring Apple shares and has cashed out around US$134B from trimming its stake.
Combined with its existing stake, Berkshire has generated a near 5x return on its investment in Apple over the past decade.
What can investors learn from Warren Buffett’s decision to buy Apple stock?
Apple demonstrates how Buffett’s principles remain relevant in today’s markets:
Return on equity and operating margin highlighted extraordinary profitability.
Debt discipline provided a strong balance sheet, not a risky one.
Free cash flow showed Apple could self-fund growth and buybacks.
Margin of safety came from a low PE multiple based on market misperceptions.
Moats and compounding turned short-term doubt into long-term outperformance.
Buffett didn’t buy Apple because he became a tech believer. He bought it because Apple fit his timeless value framework.
By focusing on fundamentals, ignoring the noise and insisting on a margin of safety, Buffett turned a surprising bet into Berkshire’s greatest success of the decade.
This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
More resources:
✅ How to read a balance sheet→
✅ How to invest $5,000 in Australia today→
✅ How to get started with value investing→
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Value investing FAQs
Buying at a discount can give you a margin of safety and more upside when the market re-prices the stock.
Learn about some of the top value stocks on the ASX.
Yes. It’s patient, typically lower-risk, and not tied to chasing market hype.
Yes. Buffett’s recent bets on UnitedHealth and Constellation Brands prove its enduring appeal.
Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.
