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Doesn't Buffet famously stay away from Tech? What changed? He is buying Yahoo and has invested in Apple.
by yalogin 10y ago
Doesn't Buffet famously stay away from Tech? What changed? He is buying Yahoo and has invested in Apple.
- arvinjoar 10y agocompare market cap to assets
- TrainedMonkey 10y agoValuations dropped enough for it to be a sensible buy. Buffet stated before that he does not understand why tech valuations are so high based on the fundamentals.
- Someone1234 10y agoAnd he's quite right. Apple might be the exception because of their extensive cash reserves. But if you look at Facebook or Twitter, it is hard to tell why they're selling for that amount. I myself avoid index funds which over-invest in tech because I believe we're in a bubble.
- deleted 10y ago[deleted]
- encoderer 10y agoHow you could compare Facebook to Twitter is beyond me.
- deleted 10y ago[deleted]
- Someone1234 10y agoI didn't compare them, I grouped them together.
- encoderer 10y agoSo you would group them, but not compare them to each other?
- ep103 10y agoeh, the valuation on facebook I understand though. Yes, it is extremely high, but the premise is that with that much social data, that much user stickiness, and that level of talent, and you are one of very few players that look like they could seriously give google a run for their money in the advertising business. Read enough, and you start wondering if Verizon / Google / Facebook won't outright own digital advertising industry in enough time. Read some more fanciful stuff, and you start wondering if they have enough data to actually change user behavior and dictate spending streams preemptively. I could be wrong on all of this though, I'm just a dev, not an industry expert : )
- swyman 10y agoIt sounds like he's just providing financing for a Gilbert-led group of investors. I don't know enough about private equity or Warren Buffett to know if that's still significantly out of character for him
- hristov 10y agoProbably valuations dropped low enough that yahoo can be valued as a classic media company instead of a tech company. What generally scares Buffet from tech is that the price of tech stocks is greatly inflated to reflect expectations of future growth. Buffet is very skeptical of inflated expectations of future growth. But I do not think there is any great expectations of future growth in yahoo. In fact many analysts say that if you strip out the valuable asian assets, the value implied by the market for Yahoo's US business is about zero or even negative. So the answer is that Yahoo is not really a tech stock anymore, but the traditional definition of that term. At least it is not priced like a tech stock.
- nerfhammer 10y ago> the value implied by the market for Yahoo's US business is about zero or even negative. Probably precisely why Buffet is interested in it.
- ori_b 10y ago> In fact many analysts say that if you strip out the valuable asian assets, the value implied by the market for Yahoo's US business is about zero or even negative. If the value implied by the stock price is zero or negative, then even buying the company and selling off the office furniture nets you a tidy profit. More realistically, it's very likely that if a company has negative value -- ie, that someone would pay you to take it off their hands -- then it is severely undervalued.
- avar 10y agoI don't think that's true. Even badly performing companies like Yahoo! aren't only priced as a sum of their physical assets, but also intangible ones, e.g. the skills of their employees, their market position etc.
- daemin 10y agoSomeone actually did a calculation of this just recently, like about a month ago max. Adding up the Alibaba stake, the Yahoo Japan stake, the office and associated infrastructure, that summing those up totalled far less than the current share price. Somewhere around -8 billion IIRC.
- verganileonardo 10y agoHe is not buying equity in Yahoo, he is lending money to the actual buyer and will receive interest on that lending. (Which is much more secure)
- rkrzr 10y agoActually it sounds as if he would be buying convertible bonds according to the article. This means he will have the opportunity to convert his bonds into equity at some point in the future (at some share price in the future) if he chooses to exercise this right. Otherwise he will indeed just be collecting interest.
- verganileonardo 10y agoYes, that is exactly the case! :)
- sytelus 10y agoSo he is assuming Gilbert & company would be able to turn Yahoo around, churn out some cash and pay the interest? That would be very long shot given the history.
- Grazester 10y agoThat was back in the day before he even bought IBM shares
- zekevermillion 10y agoWhere else can you find an outlet to spend over a $billion at once where the underlying assets are more valuable than the security that represents them? Kind of a unique and Buffet-like opportunity.
- oh_sigh 10y agoBuffett(BRK) is financing the deal. That's different from investing
- Animats 10y agoApple has a P/E ratio of 9.82. (2015 actual). That's what a mature, profitable company looks like. AAPL isn't overvalued. That's the sort of thing Buffet buys. IBM is at 9.90. Compare P/E (last full year numbers): Google: 31.12 Facebook: 80.41 Salesforce: 948.63 Twitter: (loss) LinkedIn (loss)