Apple stock (AAPL) currently represents nearly 40% of Berkshire Hathaway’s equity holdings. But speaking to Berkshire (BRK-A, BRK-B) shareholders on Saturday, CEO Warren Buffett noted that saying Apple comprises this percentage of Berkshire’s overall investment portfolio is not an accurate understanding of the business.

“Apple is not 35% of a Berkshire portfolio,” Buffett said. “Berkshire’s portfolio includes the railroad and the energy business Garanimals, you name it, See’s Candies — they’re all businesses.”

Berkshire listed $997 billion in assets at the end of the first quarter, and only $328.16 billion of those were invested in equity securities. Still, Apple has become a massive holding in Berkshire’s equity portfolio since the company first started buying in 2016.

That has spawned from additional buying by Berkshire but also from growth in Apple’s services business and Apple’s commitment to stock buybacks. Apple stock has risen more than 500% since Berkshire first purchased it while buybacks have increased Berkshire’s stake in Apple. Today, Berkshire owns about 5.8% of the company.

“It just happens to be a better business than any we own,” Buffet said. “And we put a fair amount of money in it, but we haven’t got more money in it than we’ve got in the railroad…our railroad is [a] very good business, [but] was not remotely as good as Apple’s business.”

Buffett has long been a supporter of Apple CEO Tim Cook and the stickiness of the company’s products, including the iPhone. On Saturday, Buffett quipped: “I don’t understand the [iPhone] at all, but I do understand consumer behavior.”

Less than 24 hours after iPhone sales growth catapulted Apple stock by nearly 5% on Friday, Buffett once again touted the strategic advantage of the iPhone.

“Apple is in a position with consumers, where they’re paying maybe $1,500 bucks, or whatever it may be, for a phone,” Buffett said. “And the same people pay $35,000 for having a second car, and [when] they have to give up a second car or give up their iPhone, they’d give up their second car. I mean, it’s an extraordinary product. We don’t have anything like that that we own 100% of, but we’re very, very, very happy to have 5.6%, or whatever it may be, and we’re delighted every 10th of a percent that goes up. “

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The discussion around Berkshire’s ownership of Apple stemmed from an investor’s question about portfolio diversification. And while Berkshire owns a plethora of stocks, its top holdings have quickly become the company’s largest. Five companies comprise about 75% of Berkshire’s stock holdings.

Buffett’s right-hand man Charlie Munger doesn’t think the lack of diversification is a problem.

“One of the female things [that gets] taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks,” Munger said. “That is an insane idea. It’s not that easy to have a vast plethora of good opportunities that are easily identified. And if you’ve only got three, I’d rather it be my best ideas instead of my worst. And now, some people can’t tell their best ideas from their worst, and in the act of deciding an investment already is good, they get to think it’s better than it is. I think we make fewer mistakes like that than other people. And that is a blessing to us.”

Josh is a reporter for Yahoo Finance.

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