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Did Warren Buffett Pick the Wrong FAANG Stocks?

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FAANG

As we noted previously, Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, has generally stayed away from technology stocks over the last 50 years. He did invest in IBM (IBM) in 2011, but the investment didn’t play out the way Buffett wanted. He also invested in Apple (AAPL) in 2016. He continued to add more Apple shares in the third quarter of 2018.

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Consumer products company

Meanwhile, Buffett sees Apple as a consumer company. The long lines to buy new iPhones are probably the moat Buffett looks for in companies. The iPhone is still an aspirational phone for many consumers. The so-called “FAANG” pack, which includes Amazon (AMZN) and Alphabet (GOOG), has been the key driver of market returns. Lately, some of the FAANG stocks, especially Facebook and Apple, have looked vulnerable. Facebook (FB) has been under pressure amid controversy about the way it handled users’ data. Apple has been exposed to China’s slowdown. Earlier this month, Apple also lowered its revenue guidance due to the slowdown in China.

Apple

While it’s too early to write off Apple, the company seems to have been rerated by markets, just like Facebook. While Apple’s products are still sought after, Buffett might have invested in the company towards the end of the cycle.

Over the years, Buffett has been known for his defensive investments. Is being too defensive eating into Berkshire Hathaway’s earnings?

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