Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, is known for value investments. Buffett has frequently said that over the long term, equity investments deliver the best returns. He regularly compares the S&P 500 (SPY) returns with gold (GLD) to substantiate his point.
There’s little denying that over the long-term, equities tend to deliver the best returns. Berkshire Hathaway’s price action supports this fact. Although Berkshire Hathaway’s recent performance compared to the S&P 500 hasn’t been encouraging, it outperformed the markets by a wide margin in the last century.
Buffett decided to largely stay away from tech names including NVIDIA (NVDA), Advanced Micro Devices (AMD), and Tesla (TSLA). While Buffett invested in Apple (AAPL), he stayed away from other FAANG stocks like Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). Buffett sees Apple as a consumer company and not a tech company. Some of Buffett’s other bets like General Electric (GE) and IBM (IBM) also didn’t work out well.
In his 2018 shareholder letter, Buffett hit out at doomsayers. Several observers, including Jeffrey Gundlach and Goldman Sachs (GS), are bearish on the markets. Some economists see mounting risks in higher government debt. Regarding government debt, Buffett pointed out that the US government debt has risen 400 times in the last 77 years. He also said that during this period, there have been Republicans and Democrats almost equally in the White House. Despite intermittent periods of despair, including wars and recessions, equities have delivered handsome returns.
Buffett, who had backed Hillary Clinton in 2016, seemed to have advice for President Trump, which we’ll discuss in the next part.