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Buffett: Social-Networking Sites are Overpriced Ahead of IPOs

25 points by gatsby 16y ago

woan 16y ago
Really can't argue with the Oracle that there that the majority of these are over-valued. In a sense that just means they are priced for success though we know many will fail or be limited niche businesses. The key statement though as it relates to a specific company is: “Some will be huge winners, which will make up for the rest.”
deleted 16y ago
[deleted]
MartinCron 16y ago
The fascinating thing about Buffet is that so many people claim to respect him and his opinions while they do the exact opposite. Fundamental value investing? Investing only in companies that you really understand? Taking a long view? All seem to be horribly out of fashion the moment people start feeling exuberant. While people are investing millions in yet-another-photo-service, what was the last big thing Buffet bought into, railroads?
- bradleyland 16y ago
  It's hard to compare tech investors to Warren Buffet. He doesn't do tech because he doesn't know it. He invests in what he knows, which tend to be companies that have a physical deliverable.
  - juiceandjuice 16y ago
    I think he knows about tech. I think he doesn't invest in it because it's volatile.
    - tsotha 16y ago
      In the past he's pretty much said straight out he doesn't understand it. You can take that a couple of different ways. I doubt he's a technophobe, but I wouldn't be surprised if he didn't really understand the difference between, say, an application and and operating system.
  - Swannie 16y ago
    Well I'd argue Warren has bought into tech, just physical delivery tech, not pure software tech. This is understandable tech. Particularly I'm thinking of Iscar, who use some of the most advanced manufacturing techniques to make special tools for metal working. It would be hard to argue that this company don't very heavily leverage software, to the point where is part of their product. http://www.iscar.com/ http://www.iscar.com/ MiTek is another company, who specifically sell engineering software, along with building technology: connectors, joists, beams, roofing etc. www.mitek.com
- juiceandjuice 16y ago
  Exactly. Railroads have been around 150+ years, and they'll probably be around another 150. No social networking company has even been around 10. Who knows if there will be a facebook in 2020?
- chr15 16y ago
  You can still respect someone and not subscribe to all of their philosophies/ideologies. They aren't mutually exclusive. I have enormous respect for Buffet. He clearly knows what he's doing. However, his investment style isn't compatible with my appetite for risk.
bfe 16y ago
As noted in the article, Buffett also shuns tech investments - and Buffett has said he doesn't invest in something he can't understand well, and he doesn't understand tech. And he's not wrong. Nobody understands the conditions for the future success of companies on the edge of new technologies on the kind of level that makes Buffett comfortable enough to invest.
- c2 16y ago
  Exactly, Buffett's whole investment philosophy revolves around margin of safety. What's the margin of safety in a fast growing speculative space such as tech? Zero. Not to say that you can't pick winners, but it is wholly different from buying a controlling interest in a company which has the potential to reap high profits with tighter management (see, Coke, Wrigleys, Wendy's, Railroads, etc).
VladRussian 16y ago
while i thought only atomic bomb explosion can have such dynamic, it happens Groupon valuation too: from http://www.bloomberg.com/news/2011-03-17/groupon-is-said-to-discuss-ipo-valuation-of-up-to-25-billion.html http://www.bloomberg.com/news/2011-03-17/groupon-is-said-to-... : Groupon Inc. has held talks with banks about an initial public offering that would value the online-coupon company at as much as $25 billion ... Groupon was valued at about $1.3 billion last April, when it raised $135 million from investors, including Digital Sky Technologies. It contemplated more funding at a $3 billion valuation in November, shortly before Google’s offer. An investment of $950 million, completed in January, pegged Groupon’s worth at $4.75 billion.
dbs 16y ago
Buffett has said before that he doesn't invest in tech because he doesn't know how to evaluate the pricing power of these companies and because they are more prone to industry change.

25 points by gatsby 16y ago

woan 16y ago

Really can't argue with the Oracle that there that the majority of these are over-valued. In a sense that just means they are priced for success though we know many will fail or be limited niche businesses. The key statement though as it relates to a specific company is: “Some will be huge winners, which will make up for the rest.”

deleted 16y ago

[deleted]

MartinCron 16y ago

The fascinating thing about Buffet is that so many people claim to respect him and his opinions while they do the exact opposite. Fundamental value investing? Investing only in companies that you really understand? Taking a long view? All seem to be horribly out of fashion the moment people start feeling exuberant. While people are investing millions in yet-another-photo-service, what was the last big thing Buffet bought into, railroads?

bradleyland 16y ago
It's hard to compare tech investors to Warren Buffet. He doesn't do tech because he doesn't know it. He invests in what he knows, which tend to be companies that have a physical deliverable.
- juiceandjuice 16y ago
  I think he knows about tech. I think he doesn't invest in it because it's volatile.
  - tsotha 16y ago
    In the past he's pretty much said straight out he doesn't understand it. You can take that a couple of different ways. I doubt he's a technophobe, but I wouldn't be surprised if he didn't really understand the difference between, say, an application and and operating system.
- Swannie 16y ago
  Well I'd argue Warren has bought into tech, just physical delivery tech, not pure software tech. This is understandable tech. Particularly I'm thinking of Iscar, who use some of the most advanced manufacturing techniques to make special tools for metal working. It would be hard to argue that this company don't very heavily leverage software, to the point where is part of their product. http://www.iscar.com/ http://www.iscar.com/ MiTek is another company, who specifically sell engineering software, along with building technology: connectors, joists, beams, roofing etc. www.mitek.com
juiceandjuice 16y ago
Exactly. Railroads have been around 150+ years, and they'll probably be around another 150. No social networking company has even been around 10. Who knows if there will be a facebook in 2020?
chr15 16y ago
You can still respect someone and not subscribe to all of their philosophies/ideologies. They aren't mutually exclusive. I have enormous respect for Buffet. He clearly knows what he's doing. However, his investment style isn't compatible with my appetite for risk.

bfe 16y ago

As noted in the article, Buffett also shuns tech investments - and Buffett has said he doesn't invest in something he can't understand well, and he doesn't understand tech. And he's not wrong. Nobody understands the conditions for the future success of companies on the edge of new technologies on the kind of level that makes Buffett comfortable enough to invest.

c2 16y ago
Exactly, Buffett's whole investment philosophy revolves around margin of safety. What's the margin of safety in a fast growing speculative space such as tech? Zero. Not to say that you can't pick winners, but it is wholly different from buying a controlling interest in a company which has the potential to reap high profits with tighter management (see, Coke, Wrigleys, Wendy's, Railroads, etc).

VladRussian 16y ago

while i thought only atomic bomb explosion can have such dynamic, it happens Groupon valuation too: from http://www.bloomberg.com/news/2011-03-17/groupon-is-said-to-discuss-ipo-valuation-of-up-to-25-billion.html http://www.bloomberg.com/news/2011-03-17/groupon-is-said-to-... : Groupon Inc. has held talks with banks about an initial public offering that would value the online-coupon company at as much as $25 billion ... Groupon was valued at about $1.3 billion last April, when it raised $135 million from investors, including Digital Sky Technologies. It contemplated more funding at a $3 billion valuation in November, shortly before Google’s offer. An investment of $950 million, completed in January, pegged Groupon’s worth at $4.75 billion.

dbs 16y ago

Buffett has said before that he doesn't invest in tech because he doesn't know how to evaluate the pricing power of these companies and because they are more prone to industry change.