How Apple became Warren Buffett's best investment.

Warren Buffett controls and owns stakes in dozens of businesses.

But there is one in particular that tops all the rest: Apple.

"It just happens to be a better business than any we own," Buffett said at Berkshire Hathaway’s annual shareholder meeting on Saturday.

While Berkshire has been invested in Apple since 2016, Buffett’s comment is a reminder of his about-face on investing in tech stocks.

For years he avoided them because he felt technology was an industry he did not understand.

That reluctance extended to stocks such as Microsoft, despite his decades-long friendship with Bill Gates.

But in Apple, he’s found a winner.  

So much so that it has become an elephant in Buffett’s portfolio, with Berkshire’s current stake valued at more than $150 billion.

The economics of Apple

When Berkshire first disclosed a modest stake in Apple 7 years ago, headlines suggested the move had very little to do with Buffett himself.

There were frequent references to newer members to Berkshire’s investing team — namely Todd Combs and Ted Weschler.

While both play an enormously influential role within the Berkshire empire, Buffett’s latest comments confirm he is deeply familiar with the economics of Apple.

“I don’t understand the phone at all, but I do understand consumer behavior,” Buffett said on Saturday.

Buffett, who is 92 years old, was fielding investor questions alongside his business partner Charlie Munger, who is 99.

With Apple, Buffett emphasized the value its customers place on their devices, noting they’d likely give up a second car before letting go of their iPhone

(Buffett himself finally ditched his flip phone a couple of years ago, replacing it with an iPhone.  He also has an iPad.)

That consumer loyalty was on full display, when Apple reported better than expected iPhone sales earlier this week.

Resilient iPhone demand helps create a moat around Apple’s business — and boy, does Buffett love moats.

That’s because they can open the door to other opportunities, such as  Apple’s services business.  It includes iCloud, Apple Music, the App Store and its TV+ streaming offering.

The unit had stronger revenue growth than the iPhone in the latest quarter.

Tim Cook…the “classiest” CEO

As much as Buffett loves businesses that can run themselves, he often singles out standout leaders.

He has called Tim Cook the “classiest CEO” — someone who knows how to run the business, but also respect the wishes of shareholders.

Apple’s stock — which 77% of the Wall Street analysts recommend buying — is up nearly 35% this year, making it the second best Dow performer.

This past week, Apple put some of its monster cash flows to work, by boosting its dividend and committing to buying back even more stock.

Berkshire can kick back and collect massive dividend payments from Apple, as it does with other big holdings such as Bank of America or Coca-Cola.

And the stock buybacks end up boosting Berkshire’s ownership in Apple, which stands at around 6%, regardless of whether Berkshire itself commits to buying more shares.