Berkshire Hathaway's Greg Abel Says He Expects Apple Will "Compound Over Decades"

Berkshire Hathaway (NYSE: BRKB)(NYSE: BRKA) just released its annual letter. And investors were watching closely, as this was the conglomerate's first annual letter from Berkshire CEO Greg Abel, Warren Buffett's successor, who took the helm at the start of 2026. Investors are keen to gauge what Berkshire will look like without Buffett running the show, and the letter gave them a glimpse.

Fortunately for Berkshire shareholders -- and investors in the publicly traded companies he called out by name -- Abel had a lot to say in his first shareholder update. While investors often scour the document for clues about what the conglomerate might buy next, the most telling takeaway this year was about what Berkshire won't be selling. Abel indicated investors should expect only "limited activity" in the company's biggest equity holdings, including American Express, Coca-Cola, Moody's, and iPhone maker Apple (NASDAQ: AAPL).

The underlying message was straightforward: Abel expects these businesses to "compound over decades," he said in the letter.

It is a testament to how exceptional Abel thinks these businesses are that he is talking about a decades-long time horizon. And combining Abel's confidence in and high praise of Apple with the fact that the tech company is Berkshire's largest equity holding is particularly comforting news for Apple investors specifically.

Image source: Apple.

High praise

Abel had quite a bit to say about Apple and Berkshire's other three core holdings of its equity portfolio.

In addition to saying he believes they will "compound over decades," he insinuated that Berkshire's philosophy for selling its core holdings will rely less on valuation and more on the underlying business, as he said the conglomerate's criteria for any significant adjustments to its positions in its four largest equity holdings is to do so only if there is a fundamental change in the company's long-term economic prospects.

In addition, Abel gave Apple and these other three companies extremely high praise, not only saying they should compound over time, but also that they are businesses that Berkshire understands well and ones in which it has "a high regard for their leaders..."

Steady growth

This focus on business fundamentals helps explain why Berkshire is content to sit on its massive Apple position. After all, the tech giant's underlying business has been putting up impressive numbers recently.

Apple's earnings per share rose 19% year over year in fiscal Q1.

A key driver of this profitability is the company's services segment. This segment commanded a gross profit margin of 75.4% for fiscal 2025. Accounting for about 26% of Apple's fiscal 2025 revenue, this high-margin revenue stream provides the exact kind of durable, long-term cash generation that supports a multi-decade holding period.

Further, Apple's fiscal first-quarter sales grew 16% year over year, while its earnings-per-share growth was even faster, highlighting impressive operating leverage.

And with services growing as a percentage of the total business in recent years, momentum from this high-margin segment could help lift Apple's overall gross margin over the long haul.

Valuation still matters

Of course, holding a stock for decades does not mean ignoring valuation entirely. At about 33 times earnings, the tech stock's valuation arguably already prices in continued robust services growth and strong pricing power for years to come. Still, given the company's exceptional customer loyalty and management's track record of good capital allocation, I think the stock is worth paying a fair price for.

Some key risks include an unexpected meaningful deceleration in its services revenue or the erosion of its pricing power over time. But there's also potential upside scenarios in which Apple's hardware sales benefit from an AI tailwind or Apple's services business actually accelerates.

Overall, I think Apple stock is a solid hold for long-term investors. Like Berkshire, I'd rather be patient and let the business compound.

American Express is an advertising partner of Motley Fool Money. Daniel Sparks and his clients have positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Moody's. The Motley Fool has a disclosure policy.