• Berkshire owns about 5.5% of Apple
  • Berkshire purchased its first 10 million Apple shares in May 2016
  • Since Mar. 20, Apple shares have soared almost 71%

Warren Buffett’s Berkshire Hathaway (BRK-A) has earned $40 billion on its stake in tech giant Apple (AAPL) since the market bottom in March.

High-flying Apple shares now account for more than 40% of Berkshire’s total equity portfolio – in stark contrast to Buffett’s reputation as a value investor.

Berkshire’s heavy concentration in Apple has allowed it to flourish during the pandemic as its holdings in other sectors, including insurance and energy, have suffered declines.

“Had [Buffett] stuck to his guns and only bought value stocks, that portfolio would not have done as well,” said Cathy Seifert, a Berkshire analyst at CFRA Research. “At the end of the day, shareholders are going to applaud this move.”

Berkshire purchased its first 10 million Apple shares in May 2016. Over the past four years, Berkshire kept adding to its Apple holdings to reach 245 million shares, now valued at more than $95 billion.

Berkshire is now Apple’s second largest institutional shareholder with a 5.5% stake, behind only the Vanguard Group mutual fund behemoth.

Since Mar. 20, Apple shares have soared almost 71% through Wednesday. On that day, the company received more good news by winning a court case in Europe concerning a dispute over $15 billion in unpaid Irish taxes.

Prior to moving into tech shares, Berkshire’s equity portfolio was concentrated in financials and consumer stocks. As a result, Buffett missed out on the last tech-driven bull run.

However now the Oracle of Omaha considers Apple as Berkshire’s “third-largest business,” after its insurance and railroad interests.

“[Apple is] probably the best business I know in the world,” Buffett said in February. “I don’t think of Apple as a stock. I think of it as our third business.”

The Apple stake is a "bigger commitment [than] we have in any business except insurance and the railroad," Buffett added.

However, Buffett’s concentration in Apple has come under some criticism, given its sky-high valuation.

“The challenge for Buffett is -- are we in a financial euphoria episode and is Apple going to get sucked down?” said Bill Smead, chief investment officer at Smead Capital Management, (Smead himself is a Berkshire shareholder).

Shares of Apple – trading at $385 per share as of 1 p.m. Thursday -- are priced at about 30.2 times forward earnings.

“Apple is not the most egregious part of this, but like it or not, it is twisted up in the game,” Smead said. “[Buffett is] a long-term holder and he does not like to pay the tax on the gain.”