Warren Buffett isn’t convinced the tech industry can continue to grow – and perhaps we shouldn’t be, either

The Oracle of Omaha has been more right than wrong over the years, writes Hamish McRae

Buffett can encapsulate huge global investment puzzles in a few choice words (Getty)

When Warren Buffett says something, even investors who do not agree with him sit up and listen. So the Oracle of Omaha’s annual letter to shareholders ranks only behind his annual meeting of Berkshire Hathaway as a moment to ponder about the next directions of the world of assets. And this weekend’s letter is particularly interesting for two reasons: he has had a bad year; and he is finding it hard to discover real value in most shares.

The bad year is summed up in two numbers: 11 per cent and 31.5 per cent. The first is the increase in the per-share market value of Berkshire Hathaway stock. The second is the rise in the S&P 500 index with dividends included. On a long view, since 1965, he has beaten the index, with a compounded annual gain of more than 20 per cent, vis-a-vis one of 10 per cent for the S&P. That is why he remains, at the age of 90, a hero for many small (and now not-so-small) investors. But 2019 was not good.

There are two ways of looking at this. One is to say that he missed out by not realising how important the tech boom was to the US economy. Tech titans Microsoft, Apple, Google, Facebook and so on dominate the world in their various segments. He did not see this – or rather did not see it sufficiently early, for one of his largest holdings is Apple, so he does have a stake in there. The other way of looking at it is to say that on a long view the valuations of these high-tech companies are far too high. Yes, they are wonderful, but they are over-priced.