Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, hasn’t been a fan of technology stocks. Technology stocks haven’t been Buffett’s area of expertise. One of Buffett’s quotes is “Never invest in a business you cannot understand.” IBM (IBM), Buffett’s maiden technology venture, didn’t play out as expected. Although Buffett invested in Apple (AAPL) in 2016, he sees the company as a consumer product company.
Technology stocks in the 1990s
Buffett avoided technology companies during the boom in the 1990s. At that time, most of the high-flying technology stocks turned out to be fads. However, the picture has been different in the last decade. Technology stocks, especially the so-called “FAANG” stocks, have been a key driver of markets returns. Buffett did admit that he missed out on Alphabet (GOOG) and Amazon (AMZN). He invested in Apple, but the stock has come under pressure due to concerns about iPhone sales.
Buffett didn’t invest in Microsoft (MSFT). During last year’s shareholder meeting, Buffett was candid about Microsoft. He said that not investing in Microsoft in “earlier years” was “stupidity.” In more recent years, Buffett avoided the company due to his friendship with Bill Gates. Also, Gates was on Berkshire Hathaway’s board.
Since Buffett didn’t invest in the high-flying technology stocks that have driven market returns over the last few years, Berkshire Hathaway’s outperformance compared to the S&P 500 has narrowed. Buffett invested in Apple in 2016. However, the company has looked vulnerable over the last few months.