Warren Buffett's value investing may have worked pre Internet, but now with tech companies being valued on so many intangibles, value investing is over. For example, Walmart's stock has flatlined for the past 5 years even though they have the largest workforce in the country (2 million), largest revenue on the planet ($486 billion), and a track record of destroying the competition. But they missed the boat when it comes to online retail and Amazon filled that gap. Amazon has the second largest workforce (500 thousand), doesn't even make the top 10 in companies with largest revenues ($178 billion), and yet their stock has increased exponentially in the past 5 years surpassing Walmart in market cap so that today Walmart's market cap is at $282 billion and Amazon's market cap is at $864 billion.
Sears is done. GE is finished. The name of the game isn't revenue or real estate or assets. Airbnb.com has no assets to its name as its landlords are all independent contractors who could easily jump ship and post their listing on another competitor. And yet Airbnb is worth $30 billion. Uber has no assets to its name as its drivers are independent contractors who could easily jump ship and drive for another app. And yet Uber is worth $60 billion.
When valuing a company like Google, how do you measure an intangible like Google Earth, which Google gives out for free without advertisements. Such an incredible, innovative, mind blowing, and revolutionary app which lets everyone travel the world virtually and see what places look like, and Google gives it away for free. How can anyone put a price on that, it's not like that's on the asset column in Google's income statement.
The game is changing. Investors can't just look at a management team, read over their financials, and figure that in the long run their stock will go up over time. Conversely, investors can't overlook a company simply because it has no assets, no revenue, and no overt competitive advantage where its workers can go elsewhere.
So Buffett can say that there were no good deals this year and that's why he didn't do any major acquisitions as everything was overpriced, but we are living in a new world totally different than the past 88 years where knowledge and information can be transmitted instantaneously for free over the Internet and that means that people know stuff and are fast to act in a way unheard of in history.
And for those Buffett loyalists who believe he is infallible and should be given the benefit of the doubt: his only two tech investments are IBM and Apple, and IBM he lost nearly the entire investment before selling, while Apple is more recent and it is still to be seen.
Submitted October 19, 2018 at 09:00AM by evilreadit https://ift.tt/2Eym8PE
