Why Warren Buffett Loves Apple Stock

Although Warren Buffett regrets not buying Google and Amazon stock, he isn’t making the same mistake with Apple.

After first investing in Apple in 2016, the iPhone maker is now the largest holding of Buffett’s Berkshire Hathaway, which owns a staggering 250 million Apple shares, Buffett said Saturday. That makes his Apple position worth about $ 46.3 billion at current prices.

But at the annual Berkshire Hathaway meeting in Omaha Saturday, Buffett faced questions about how he became so bullish on Apple (aapl)—after famously avoiding tech stocks for most of his investing lifetime.

“I didn’t go into Apple because it was a tech stock in the least,” Buffett explained at the Berkshire meeting. “I went into Apple because I came to certain conclusions about both the intelligence with the capital they deploy, but more important the value of their ecosystem and how permanent that ecosystem could be.”

Apple, whose stock hit a new record high Monday, has been a major winner for Berkshire Hathaway: Apple’s stock price has roughly doubled in the two years since Berkshire initially disclosed its stake.

Buffett is a big fan of so-called economic moats, or advantages that allow companies to retain their customers despite the competition—which for Apple is the iPhone, he said. “We’re betting on the success of Apple products like the iPhone, and I see characteristics in that that make me think it’s extraordinary,” Buffett said.

But there’s another reason Buffett loves Apple besides its tech gadgets: Apple’s massive cash hoard, which allows it to buy back a lot of its own stock.

After offering its first stock buyback in August 2012, Apple has bought back $ 200 billion worth of stock, and just announced last week that it would repurchase an additional $ 100 billion in its shares.

While stock buybacks are a controversial way for companies to spend cash that they could otherwise invest in growth or acquisitions, Buffett said that in Apple’s case it makes sense.

“I think it’s extremely hard to find acquisitions that would be accretive to Apple that would be in the $ 50 billion, or $ 100 billion or $ 200 billion range,” Buffett said. “I’m delighted to see them repurchasing shares.”

Apple’s buybacks also mean that Berkshire Hathaway, which owns roughly 5% of Apple’s outstanding shares, could end up owning a larger percentage chunk of the tech company in the future—simply because there will be fewer shares left after Apple buys them up.

“I love the idea of having our 5% grow to 6 or 7% without us laying out a dime,” Buffett said. “It’s worked for us in many other situations.”

Although investors enjoy speculating on which companies Apple should acquire, Buffett, ironically, is quite pessimistic about its M&A potential.

“As I look around the horizon, I don’t see anything that would make a lot of sense for them [to buy] in terms of what they’d have to pay and what they would get,” said Buffett, who is known for investing in low-priced stocks. “Whereas I do see a business that they know everything about, and where they may or may not be able to buy at an attractive price when they repurchase their shares.”

In other words, the business that looks most attractive for Apple to buy is Apple itself. “Like I say, [Apple CEO] Tim Cook can do simple math and he can probably do very complicated math too,” Buffett added. “So we very much approve of them repurchasing shares.”