Prior to the IPO, Warren Buffett and Berkshire Hathaway invested in the cloud-based company, Snowflake. Buffett avoided tech companies for years and invested heavily in banks. This trend is starting to reverse and Bitcoin (BTC) could benefit from this in the long run.
Why has Buffett largely avoided technology and reversed the trend?
Buffett abandoned technology due to his core value investing philosophy. Buffett loves to evaluate businesses based on cash flow, competitive advantage, and overall stability. He previously said:
“The key to investment is not assessing the industry’s impact on society or its growth, but determining the competitive advantage of a particular company and, above all, the sustainability of this advantage. The products or services that surround it have broad and sustainable trenches that reward investors.”
Many fast-growing technology companies lack stable cash flow and predictable long-term growth rates. The technology landscape does not greatly complement Berkshire’s strategy and investment portfolio.
But in recent years, Buffett has begun investing in the technology market. Berkshire owns $ 117 billion in Apple and $ 1.7 billion in Amazon. Both companies are hugely profitable and dominate their markets.
Recently, Buffett has made a unique move. Prior to the IPO, Berkshire invested in cloud tech company Snowflake. Buffett has historically avoided tech markets and IPOs, and the Snowflake deal signals a trend reversal.
The Berkshire Snowflake deal has no direct comparison to Bitcoin or the cryptocurrency. But it does show that Buffett is starting to think about digitizing many large industries.
In June, Christopher Rusbach, chief investment officer at J Stern & Co, said Berkshire needed to adjust to the present. He said Berkshire needs to focus on companies that will be making big profits over the next 25 years. He said:
“If Berkshire is to be able to generate the value it has had in the past, it must adapt by acquiring companies that will create significant value over the next 25 years.”
Recent offerings from Berkshire, such as investments in Barrick Gold and Snowflake, show the company is gearing up for long-term growth.
Bitcoin could lead the digitization of the economy
Over time, the ubiquitous digitization of major sectors will fuel the long-term trend of Bitcoin, as many investors see it as digital gold. Cameron Winklevoss, billionaire investor and co-founder of Gemini said:
“The total amount of supernatural gold on Earth is proportional to an Olympic-size swimming pool. Physical assets are easier to control, confiscate and censor. Bitcoin lives everywhere and anywhere, and its digital nature is one of its greatest strengths.”