- Berkshire Hathaway’s $570 million bet on Snowflake shows CEO Warren Buffett completely trusts his two portfolio managers, Todd Combs and Ted Weschler, one fund manager says.
- “Buffett has given full agency to his lieutenants,” Jake Taylor, CEO of Farnam Street Investments and cohost of the “Value: After Hours” podcast, told Business Insider.
- “A high-profile tech IPO is a resounding confirmation that his actions match his words,” he added.
- Taylor’s comments echo those of Paul Lountzis, who said the Snowflake investment proves Buffett “totally trusts Todd and Ted” in an interview this week.
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Berkshire Hathaway’s plan to invest about $570 million in Snowflake’s IPO shows that CEO Warren Buffett has complete faith in his deputies, Farnam Street Investments CEO and “Value: After Hours” cohost Jake Taylor told Business Insider this week.
“Buffett has given full agency to his lieutenants,” Taylor said, referring to Berkshire’s portfolio managers, Todd Combs and Ted Weschler. “A high-profile tech IPO is a resounding confirmation that his actions match his words.”
“Any lingering doubts that these guys get to invest however they want has been extinguished,” he added.
Taylor’s comments echo those of Paul Lountzis, founder and president of Lountzis Asset Management, in an interview with Business Insider this week.
Berkshire’s bet on Snowflake – despite Buffett’s historical aversion to public listings, loss-making tech companies, and lofty valuations – demonstrates that he has “total trust in Todd and Ted,” Lountzis said.
Buffett has emphasized in the past that Combs and Weschler, who managed about $14 billion each at the last count, are free to make their own investment decisions.
“They don’t have to check with me before they buy or sell anything,” he said in a Yahoo Finance interview in 2017. “It’s entirely their decision.”
Snowflake is seeking a $24 billion valuation, more than 78 times its revenue last year. Yet Berkshire’s investment in the cloud-data platform isn’t a betrayal of Buffett’s signature value-investing approach, Taylor said.
“My personal view is ‘value’ can come in a lot of flavors,” he said. “Just because something isn’t statistically cheap doesn’t mean it can’t be mispriced.”
Zachary Lountzis, Paul’s son and a vice president at his fund, made a similar argument. “Growth is a component of value,” he said, as a business can be be undervalued if the market underestimates its future earnings growth.
Buffett voiced a similar view at Berkshire’s shareholder meeting last year.
“All investing is value investing,” he said. “You’re putting out some money now to get more later on.”
“All the same calculation goes into it, whether you’re buying some bank at 70% of book value, or you’re buying Amazon at some very high multiple of reported earnings.”