Why Oracle of Omaha avoids tech by Priya Sunder

The sensex is shooting past 22k. For those who entered the market in 2008, there is finally light at the end of the tunnel.
Yet, how many of those who invested in 2008 have remained invested till now? How many have had the strength of conviction in our economy that what comes down must go up eventually? Not many .

We frequently bandy the phrase “buy low, sell high.“ Unfortunately when the markets fall, many investors “buy high, sell low.“ All investors want to make money . In fact, they want to do better than other investors. In order to do that, they must do something different. Get out of the pack, think differently, move away from the herd. Surprisingly enough, sometimes moving away from the herd just means sticking to what you believe in. In having strength in your convictions. Conviction is what Warren Buffett, one of the most successful investors of this century, had in abundance. It is about the world telling you that you are wrong, but knowing that you are right.

Buffett is called the Oracle of Omaha for his prowess in picking up the right stocks. He has also been called a tech dinosaur by his critics because of this aversion to technology companies. Buffett never picked technology stocks because he did not understand their operating model and hence could not analyse them adequately . He has often said that risk comes from not knowing what you are doing. He invested in retail companies such as garment manufacturer Fruit of the Loom, soft drink maker Coca Cola and fast food giant McDonalds. He believed in their business models and their ability to deliver strong earnings in the future. He laid a huge premium on certainty and sustainability of the business in the future. To remain sustainable in the future, businesses needed to have a competitive advantage and remain desirable to people in the future. He did not believe the new technology companies delivered on any of these grounds.

Not surprisingly, at the height of the tech boom from 1997-2000, Buffett stayed clear of technology stocks when the whole world was lapping them up. Companies could simply add the prefix `e’ or the suffix “.com“ to their names, and their share prices would soar.

Many said Buffett had missed the boat on this great investment opportunity . They called him an old, fuddy-duddy investor. When the tech bubble started deflating rapidly in 2001, investors called these dotcoms dotbombs.