- Berkshire Hathaway’s $ 570 million bet on Snowflake shows CEO Warren Buffett completely trusts his two portfolio managers, Todd Combs and Ted Weschler, a fund manager says.
- “Buffett gave his lieutenants full freedom of action,” Jake Taylor, CEO of Farnam Street Investments and co-host of the “Value: After Hours” podcast, told Business Insider.
- “A high-profile tech IPO is a resounding confirmation that his actions match his words,”
- Taylor’s comments echo those of Paul Lountzis, who said the investment in Snowflake proves Buffett “totally trusts Todd and Ted” in an interview this week.
- Visit the Business Insider home page for more stories.
Berkshire Hathaway’s plan to invest around $ 570 million in Snowflake’s IPO shows CEO Warren Buffett has full confidence in his deputies, Farnam Street Investments CEO and “Value: After Hours” cohost Jake Taylor told Business Insider this week.
“Buffett has given his lieutenants full freedom of action,” Taylor said, referring to Berkshire portfolio managers Todd Combs and Ted Weschler. “A high-profile tech IPO is a resounding confirmation that his actions match his words.”
“Any lingering doubts that these guys will be able to invest however they want have been extinguished,” he added.
Read more: Major fund manager explains the rationale behind Berkshire Hathaway’s $ 570 million investment in Snowflake’s IPO and outlines why it’s a good sign for shareholders
Taylor’s comments echo those of Paul Lountzis, founder and president of Lountzis Asset Management, in an interview with Business Insider this week.
Berkshire’s bet on Snowflake – despite Buffett’s historic aversion to public listings, losing tech companies and high valuations – shows that he has “total faith in Todd and Ted,” Lountzis said.
Buffett has pointed out in the past that Combs and Weschler, who managed about $ 14 billion each at the last tally, are free to make their own investment decisions.
“They don’t have to check with me before they buy or sell anything,” he said in an interview with Yahoo Finance in 2017. “It’s entirely their decision.”
Snowflake is looking for a valuation of $ 24 billion, more than 78 times its revenue last year. However, Berkshire’s investment in the cloud-data platform is not a betrayal of Buffett’s value investing approach, Taylor said.
“My personal view is that ‘value’ can have many tastes,” he said. “Just because something isn’t statistically cheap doesn’t mean it can’t be mispriced.”
Read more: Buy these 16 tech stocks that were defeated by the pandemic and are now ready for explosive growth in the months ahead, Stifel says
Zachary Lountzis, Paul’s son and vice president of his fund, advanced a similar discussion. “Growth is a component of value,” he said, as a company can be undervalued if the market underestimates future earnings growth.
Buffett expressed a similar view at Berkshire’s shareholders meeting last year.
“All investments are investments of value,” he said. “You’re putting out some money right now for more later.”
“All the same calculation goes on, whether you’re buying a bank at 70% of book value, or you’re buying Amazon at a very high multiple of the reported earnings.”