The “Oracle of Omaha” who made his fortune from the ideology of Graham and Dodd, is moving past Coca-Cola, Bank of America and Kraft Heinz to fintech investments made by his two lieutenants, Todd Combs and Ted Weschler. If you are interested, Berkshire Hathaway’s latest 13F filing with the SEC for Q2 2018 looks as follows.
Berkshire has invested about $300 million into StoneCo. Ltd., a Brazilian payment processor and roughly another $300 million into One97, the parent company of an Indian payment app, the Wall Street Journal reported. From blue chips to fintech, the times they are a changing. The two portfolio managers, who have total autonomy, are moving the behemoth in new directions, as Berkshire looks for a place to invest its massive cash pile of $111 billion. David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a Berkshire shareholder says, “They’re broadening the perspective of Berkshire and broadening the opportunities where they would look to invest.”
Technology has not been eschewed from Buffett’s portfolio, as Berkshire’s largest position is in apple, where SEC filings show they own 5.4% of the company. Other techs dot the fringes, but for the most part it has been tangible investing in ideas that Buffett can get his head around. The two small fintech investments do mark several of the traits Buffett would use to analyze a company. They dominate their local markets and operate in regulated industries.
The stake in StoneCo was purchased in that company’s recent initial public offering, something that is never seen at Berkshire. Buffett has amazing insight into the mindset of investors and corporations. As recent as Berkshire’s 2012 annual meeting, Buffet exclaims, “I can’t recall any time in the last 30 years, at least, that we’ve bought a new issue. Out of thousands and thousands and thousands of businesses in the world…it can’t be the most attractive thing, because sellers have the advantage of choosing when to enter the market, he said.” Touché Warren.
While Buffett, Berkshire’s chairman and CEO, has historically said technology investments are outside his area of expertise, he has hired that expertise in the form of his 2 portfolio managers. Combs has particular expertise in the banking and payments industries. Mr. Combs also sits on JPMorgan’s board and joined the Paytm board after Berkshire’s investment. Ted Weschler, on the other hand, is a fascinating story. The Glide Foundation, created by Buffett has been auctioning off a lunch date with himself for over 20 years. Weschler won the bidding two years straight, and after steak, hash browns, and cherry coke at the second lunch, Buffett offered him a job. Weschler wasn’t in it for the money, as his winning bid for lunch was $2,679,001. Weschler was not new to the investment world. A graduate of the Wharton School at the University of Pennsylvania, he studied “everything Buffett,” and created a very successful Charlottesville, Virginia, hedge-fund, Peninsula Capital Advisors.
With the hordes of cash maintained by Berkshire, it will take more than these two drop-in-the-bucket investments to move the needle. One would consider it very likely that they will open the vault to one or two major fintech companies in the years to come.