Legendary value investor Warren Buffet’s reluctance towards investing in technology stocks is well known. Even at the height of the tech boom in the late 1990s, Buffet steered clear of technology stocks. He firmly believed that most tech players lacked “economic moats” like, sets of competitive advantages that allow companies to prosper in the long run. He also believed that the valuations of these companies were inherently unstable. While he has not really embraced tech stocks, more recently he has made exceptions for companies like Apple Inc., IBM, and Amazon.
After years of restraining from investing in technology stocks, the Oracle of Omaha made an exception for one of the world’s largest technology company, Apple Inc. He bought 9.8 million shares of Apple in the first quarter of 2016 increasing it to 61.2 million by the end of 2016. Over the years, Buffet kept on increasing his exposure to the tech giant, taking his holding to 249 million shares as of November 2019. Comprising 23.84 per cent of the Berkshire Hathaway portfolio, Apple Inc. (AAPL) represents Buffett's largest holding. Needless to say, this has been one profitable investment for Warren Buffet.
Do you think it would have been possible for Warren Buffet to benefit from the sharp growth in the price of Apple Inc’s shares had he stayed anchored to his original view on technology stocks? Most likely not.
The investment landscape is constantly shifting. Due to economic cycles and the changing nature of markets, new opportunities keep germinating, while investments that seemed like a good idea in the past may no longer hold any merit. In such an environment, it is imperative that we assess new information with a clear lens and understand the impact of the same on our current investment portfolio. Unfortunately, many of us, including professionals often remain biased towards their original thought process. Due to this bias, they are unable to recognise the merits of new investments. For example, somebody with a bias would have never seen the benefits of technology stocks. This bias primarily stems from an inability to accept that one might have been incorrect in their previous assessment of the investment. We often let our egos get in the way of our investing decisions.
Investment decisions should come from a place of knowledge. The only way that you can do this is to keep yourself abreast of the latest developments in the investment world and accept that mistakes can be made. The important thing is to learn from your mistakes and turn them into profitable opportunities.