The FT recently published an article arguing that Warren Buffett and Berkshire Hathaway are losing their touch.
Warren Buffett is a more seasoned and successful investor than I am; I’d like to defend him and his strategy. He’s not losing his touch, but his industry focus shows what the broader investment community gets wrong – and what your own advisors or analysts might also be missing.
Berkshire Hathaway invests in traditional, tangible asset-focused companies. This includes banks, insurance companies (they own GEICO), railways, and until recently, airlines.
The fact that they’re not investing right now tells me they don’t see good opportunities in these traditional spaces (like banking, retail, transportation, and consumer goods).
But the term “traditional” is important.. It tends to avoid hard and soft technology companies, like those in information technology, social media, and biotechnology. Many investors still don’t completely understand how “hard” and “soft” technology investments work and how to price them.
Case in point: how do you formally depreciate data assets?
Buffett and other traditional value and fundamental investors are being hit hard because COVID-19 is hitting the industries they focus on disproportionately hard.
Digital companies, as well as ones focused on transaction facilitation and digital/data products, are particularly resilient when it comes to their business models.
In short, Buffett isn’t losing touch... But if you’re an investor that follows traditional industries then you should revisit your asset mix. Don’t just look at your stocks/bonds/cash/ETFs mix but also differentiate between traditional tangible industries/investments, and those which are intangible and often overlooked by asset managers following the “Oracle of Omaha”.
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