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Warren Buffett's Value Investing Vs. Tech-Driven Growth

Daniel Laboe

Warren Buffett, the value investment guru, said in Berkshire Hathaway's quarterly earnings call on Saturday that he has “not done anything because we haven’t seen anything that attractive.” I couldn't disagree more. This past quarter was ripe with opportunity.

My portfolio has hit all-time highs in the past few weeks, and it’s not because I am an investment guru, but because I took advantage of the rapid market downturn. I bought well-positioned tech stocks like Microsoft (MSFT), Adobe (ADBE), and Nvidia (NVDA) at price levels that I was comfortable with as we fell in February.

Uncertainty remains exceptionally high, but is this digitally driven market moving too fast for Berkshire Hathaway’s legacy investors Warren Buffett and Charlie Munger.

The equity markets are evolving quickly, and value investing is no longer king. Both Buffett and Munger made their fortunes in a different era of investing, where inefficient markets allowed for enormous opportunities in value prospects. Today, tech-driven growth investing has usurped value, leaving legacy investors twiddling their thumbs.

Future of Investing: Growth-Driven Tech

We are living in the beginning stages of the 4th industrial revolution, and technology is starting to advance at a prolific rate. This global pandemic has accentuated our reliance on tech, and these stocks have been reaping the benefits.

A lot of tech companies are trading like there is no economic disruption, and that’s because many of these tech companies have remained relatively immune to COVID-19’s impact.

Cloud-computing powerhouse, MSFT, is up over 15%, trading just off its all-time highs. Microsoft is the largest publicly traded company in the US today, as it was 2 decades ago because of its sustained innovative edge and seemingly perpetual growth profile. Its portfolio of essential enterprise cloud products has left this business relatively unscathed.

E-commerce is replacing brick-and-mortar retail, and the global pandemic created the perfect storm for society’s further reliance on digital shopping platforms. Amazon (AMZN) hit all-time highs last week, up over 26% for the year, while the broader equity market is down north of 11%.

Investors continue to pour money into the cutting-edge chipmaker Nvidia (NVDA). These shares have already appreciated 27% since the beginning of 2020, outperforming the S&P 500 by 38 percentage points. This hardware innovator is on the frontlines of AI and machine learning development with its hyper-fast GPU becoming essential to datacenters around the world.

Out with The Old and In with The New

We are living in fast times, and old school value investing just is not cutting it anymore. The 5 largest publicly traded companies today are growth profiled tech names, and I suspect that tech will continue to drive a progressively larger portion of the equity markets in the years to come.

It is time to reposition your portfolio for the future. The stocks I discussed above all represent robust long-term investment ideas. I am not suggesting that you chase these stocks' current rally, but when we see another sizable pullback, I wouldn't hesitate to dive into these best-in-class equities at price levels you are comfortable with.

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
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