Be kinde to folk. This changeth the whole habitat.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 7
At the same time Berkshire was buying Alphabet, Bill Ackman was selling it.
Ackman said, "To be clear, our sale of Google was not a bet against the company. We are very bullish long term on Alphabet. But at current valuations and in light of our finite capital base, we used [it] as a source of funds for Microsoft."
As a long-time shareholder in both Microsoft and Alphabet, I agree Microsoft appears to be the better value currently.
Wonder if someone without a finite capital base and billions to deploy might also consider Microsoft? 😉
No. of Recommendations: 4
Wonder if someone without a finite capital base and billions to deploy might also consider Microsoft?
I recall Buffett saying, well in the past, that because he and Gates were friends and on each other's boards, purchasing Microsoft could give the appearance of trading on inside info. So, like Caesar's wife, he avoided even the appearance of such.
With the current distance between Buffett and Gates, no longer on their boards, and Greg now having responsibility for capital allocation, could this no longer be a limitation? Or does the Caesar's wife analogy now extend to Greg with Buffett still chairing BRK's board? After Warren?
No. of Recommendations: 2
This was all done last quarter, and things have changed a lot.
I am also considering lightening up on Google and moving more into Microsoft, but I already own a ton of both so not feeling any urgency just yet. Who knows....
tecmo
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No. of Recommendations: 14
That is an interesting possibility that Berkshire is potentially free to buy some Microsoft.
I only recently discovered that Google has taken away some of their Office 365 (Excel et.al.) customers and found it interesting how they seem to have done it. They copied their products (Excel, Word) and gave it away for free. They used the stickiness of Gmail to introduce users to the new cloud based products that come with some nice free cloud storage. They provided schools with free products and got all the children trained up and familiar with Google. The children have now grown up and are much more comfortable with the idea of not paying for Microsoft Office. I know a few people and some companies that have moved away from Microsoft to Google in the last few years. It feels like the drug pushers strategy of getting them hooked so they can monetise later.
The cloud has made this all possible a few years ago and now AI is an additional piece Google will be very strong at. As a long time Microsoft user, there is a lot of friction around the edges in medium and large organisations that require an IT guy. I wonder if Google have an engineering edge. Everything kind of works without an IT department.
I don’t follow Microsoft unfortunately and missed out on the spectacular gains to date, but from a quick look the inroads Google have made into the Office 365 customer base is not a big deal, as it’s no longer the dominant part of Microsoft’s revenues these days.
I thought the size of the Berkshire investment in Alphabet was interesting at $20 billion. That can’t be Ted Weschler. Warren said recently he was not learning about new industries and there probably are investable companies that others at Berkshire could understand as users etc. The Alphabet investment must be a combination of Gregg with a nod from Warren and Ted?
Obviously when you add in the capex going into the AI build out and the uncertainty around the future returns, there is plenty of future change and unknowns at these big firms. There are a lot of super investors buying Alphabet since the AI wobbles a year or two ago. Maybe they have figured it out.
Jeremy Grantham did a new podcast just last week and he was banging the table that AI will be like many other new tools. They will give companies an advantage initially but eventually everyone will have the latest things and the advantage goes away.
I also have heard the Chinese could flood the market with cheap compute with their open source approach to AI.
Grantham makes the point that you have the mag 7 (other than Apple) building AI, plus there are all the new players. He thinks that level of competition will prevent monopoly profits. Grantham of course is also in the camp that the market is wildly overvalued. I think he is also saying for some additional pessimism, is that even if one of these companies did dominant AI, you would have such an extreme monopoly that the government would eventually step in, given the condition of the wider society.
If somehow Alphabet and Apple became Berkshire level cheap, could see them buying a lot more. And now maybe Microsoft as well.
It’s wild that the $20 billion in Alphabet is only 2% of Berkshire’s market cap. It will all be interesting to watch over the coming years.
