Prior to their first IPO, Warren Buffett and Berkshire Hathaway invested in the cloud technology company Snowflake. Buffett avoided technology companies for years and invested heavily in banks. This trend is starting to reverse, and Bitcoin (BTC) may benefit in the long run.
Why does Buffett often avoid technology and change the trend?
Buffett moved away from technology because of his central investment philosophy. Buffett loves to evaluate a business based on cash flow, competitive advantage and overall stability. He said earlier:
“The key to investing does not lie in assessing the degree of industrial impact on society or the degree of growth, but in determining the competitive advantage of a particular company and, above all, the sustainability of this advantage. Products or services that are surrounded by wide and stable moats are the ones that provide rewards. For investors. ”
Many fast-growing technology companies lack stable cash flow and expected long-term growth rates. The technology landscape is largely in conflict with Berkshire’s investment strategy and 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 very profitable and dominate their markets.
Buffett recently took a unique step. Berkshire invested in cloud-based company Snowflake before its IPO. Buffett has historically stayed away from the technology and intangible real estate market, and the Snowflake agreement signals a trend reversal.
Berkshire’s Snowflake deal has no direct comparison with Bitcoin or cryptocurrency. But it shows that Buffett is starting to think about digitizing many large industries.
In June, Christopher Rousbach, chief investment officer at J Stern & Co, said Berkshire needs to adapt to the present. He said Berkshire will have to focus on companies that will generate significant profits for the next 25 years. He said:
“If Berkshire is to be able to create value as it did in the past, it must adapt by acquiring those companies that will generate significant profits over the next 25 years.”
Berkshire’s recent deals, such as investments in Barrick Gold and Snowflake, show that the company is ready for long-term growth.
Bitcoin may be a major candidate for economic digitization
Over time, large-scale digitization of large sectors will benefit Bitcoin’s long-term trend as many investors see it as digital gold. Cameron Winklevoss, billionaire investor and co-founder of Gemini, said:
“The total amount of gold on the earth’s surface is equivalent to an Olympic-sized pool. Physical assets are easier to control, capture and censor. Bitcoin lives everywhere and everywhere, and its digital nature is one of the greatest strengths. ”
Bitcoin has experienced explosive growth since 2016, jumping to $ 20,000 in 2017.