The Berkshire Hathaway purchase of about $1 billion worth of Apple stock is an intriguing one, and although we’ve talked briefly of it before, it is worth looking at in a little more detail. And now that a lot of the excitement about this move has faded, we will look at how it applies to your daily binary options trading strategy.
First of all, Warren Buffett can make mistakes. Look at when he sold off his stake in McDonalds in 1998. If he had held this, his profits would have a return of more than 300 percent at this point. And with Apple, first glance will say that he’s made another mistake. Many experts believe that he is late to the game. Billionaire investor Carl Icahn, for one, sold off all of his shares. He did this at a profit of about $2 billion, which isn’t exactly chump change. For Buffett to buy at the same time that others are selling baffles many.
But it’s in perfect rhythm with almost every other deal the Oracle of Omaha has made in the past. The investor who made famous the concept of being greedy when everyone else is being cautious has often made large purchases when markets appear to be in turmoil, and this strategy has made him the richest man in the world, at times. By all outward appearances, this company is in turmoil. They have a lot of debt, and markets all over the world seem to be shunning the company.
If you look at consumer appeal, though, Apple is winning. There are millions of devoted customers that wouldn’t dream of buying a non-Apple product. The logo is one of the most easily recognized in the world, and many believe that this company has the most valuable name brand of any company ever. The management team is innovative and has proven time and time again that they can take on challenges and turn them into huge profits. And seeing these things is a very Buffett-like move. Any company can create great products. Only the best can hook a customer base and use that to keep making money. Buffett’s oft-cited rule that if you think that a company will be profitable in ten years, they are a good buy now applies here. If you think that Apple will still be around in ten years, then you are not alone. In this light, purchasing shares when Apple seems to be at a crossroads suddenly makes a lot of sense. In situations like this in the past, they have only ever become stronger than they were. So, is this a Buffett mistake? Only time will tell, but probably not.
For short term binary options traders that focus on Apple, Buffett’s move shouldn’t be seen as a promise that the stock is going to move up in price immediately. The Buffett Effect has now come and gone for the stock. However, his actions should be seen as a sign that long term growth is very likely. As you make your day to day trades, this should have almost no impact on what you do, other than keep you optimistic about where the stock is headed and give you a framework for a long term goal. Unless you are purchasing yearlong options on Apple, there’s little reason to get excited now about what Buffett is doing with Apple. Yes, his purchase of a tech stock is strange, but when seen in the bigger picture, this is not an anomaly at all, but something perfectly in keeping with what he does. Just don’t confuse long term growth with short term movement. That would be a mistake by you, and no one else.