From Nasdaq:

The average investor can improve their potential for returns by following successful investment managers, and there’s perhaps no one better to look to than Warren Buffett. The company that Berkshire Hathaway heads has a massive equity portfolio worth $370 billion, with Apple representing a whopping 48% of the total. Buffett first added Apple to the portfolio in 2016, and the stock has skyrocketed 638%, significantly outperforming the S&P 500.

Buffett’s investment in Apple was due to the company’s powerful brand, economic moat, strong financials, and low valuation. Apple’s brand allows it to charge premium pricing for its products and services, while the company’s financial soundness reduces financial risk. The low valuation in 2016 provided a massive return upside for the investment.

While Apple worked out well for Buffett and Berkshire Hathaway over the past eight or so years, it may not be a smart stock to buy right now. Apple is facing more limited growth prospects and is heavily dependent on the iPhone for revenue. The stock’s current valuation is also a major headwind, trading at a high P/E ratio of 31. This doesn’t provide a high probability of outperforming the overall market over the next five years.

Before investors buy stock in Apple, they should consider the current setup and whether the stock provides a high probability of outperforming the overall market. The stock’s current valuation is a major headwind, and it’s best to pass up on buying Apple shares unless the valuation drops significantly.

The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now, and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. The Stock Advisor service has more than tripled the return of S&P 500 since 2002.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.



Read more: Almost Half of Warren Buffett-led Berkshire Hathaway’s $370 Billion Portfolio Is Invested in Only 1 Stock