Warren Buffett’s 3 Most Intriguing Tech Investments

Warren Buffett famously avoided tech stocks for most of his career. He cited his lack of understanding at the time.Still, his attitude has evolved Berkshire Hathaway (BRK.A -1.90%) (BRK.B -1.67%)and early in the last decade, Buffett brought in Todd Combs and Ted Weschler to help manage its portfolio. IBM In 2011, he reversed his position in 2018.

Despite that failure, Buffett didn’t give up on technology. Today, stocks owned by Warren Buffett make almost every aspect of Berkshire’s portfolio heavily tech-heavy. These are his three of his most interesting techniques.

1. Apple

Both Combs and Weschler may have influenced the purchasing decision. apple (AAPL -2.38%)Still, apart from its focus on technology, Apple looks like a traditional Buffett investment. It sells products such as iPhones, Mac computers, and Apple Watch. Like banking, beverages, or insurance, the product retains the “enduring” appeal that has earned Buffett’s attention.

And like other Buffett stocks, he acquired Apple after it was established, buying his first position in the first quarter of 2016. mainstream products.

And like past Buffett purchases, it was inexpensive. At the time, Buffett was paying 9 to 12 times his earnings. And he kept adding positions. Ultimately, he held his 895 million shares. This means Apple holds more than his 38% of Berkshire’s portfolio.

Given the stock’s growth during that time, few can criticize this decision in terms of returns. That said, the size of this position is unusual for an investor who preaches diversification. Even those who follow Buffett may want to avoid investing the bulk of their portfolio in just one of his stocks.

2. New Holdings

Unlike Apple Now Holdings (No -1.28%) Buffett’s small holding of about 0.1% of Berkshire’s portfolio. Still, Nu has tremendous potential. Based in Brazil, the bank offers a digital banking platform to people in Brazil, Mexico and Colombia.

It is an anomaly in that most of the markets it serves do not have bank accounts or credit cards. This means that these consumers need fintech services such as cash cards and QR codes to make online purchases.

It also represents a departure from traditional Buffett investment principles, as this is a pre-IPO investment and will likely be chosen by Combs or Weschler.

Unlike other Buffett investments, Nu is also expensive and unprofitable. It sells for about seven times the price-to-sales (P/S) ratio, even after a significant price drop.

Still, after losing the first nine months of 2022, it made a profit of $8 million in the third quarter. Also, in the third quarter, he had $1.3 billion in revenue, up 171% compared to the same period last year. Nu could become a much larger part of Buffett’s portfolio, assuming rapid growth continues and earnings are maintained.

3. Snowflake

like Nu snowflake (snow -4.35%) It was a pre-IPO investment by Berkshire. However, it also has the potential to bring significant growth as it opens up new avenues in the industry.

Snowflake, which accounts for approximately 0.3% of Berkshire’s equity holdings, provides data cloud software that allows data to be stored, managed and protected on a cloud-based platform. Manage permissions and track changes to facilitate control and protection, and reduce the likelihood of data inaccuracy. Unlike many competing products, AmazonAWS, microsoftAzure, or another company, provides the cloud infrastructure.

This could give Snowflake a “forever” appeal, and revenue growth shows that Snowflake is rapidly gaining traction. Revenue for the first nine months of 2023 (ending October 31) was $1.5 billion, a 77% jump over the same period in 2022.

However, other factors make it less like Buffett. His $590 million lost in his first three quarters of 2023 probably makes Buffett uncomfortable. Also, his P/S ratio of 24 after the stock has fallen 65% from its all-time high would not be appealing to Buffett.

Still, it had 7,300 customers at the end of the third quarter, up 34% year-over-year. And with revenue less than 1% of his $248 billion total market, Snowflake could overwhelm the market in 2023, albeit at a significant cost.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy works for Berkshire Hathaway. The Motley Fool has positions in and endorses Amazon.com, Apple, Berkshire Hathaway, Microsoft and Snowflake. The Motley Fool recommends the following options: Berkshire Hathaway January 2023 $200 Long Call, Apple March 2023 $120 Long Call, Berkshire Hathaway 2023 January 200 short put, Berkshire Hathaway January 2023 $265 short call, March 2023 $130 short call apple. The Motley Fool’s U.S. headquarters has a disclosure policy.

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