Investments by Buffett's successors: Berkhire Hathaway invested $600 million in fintech for the first time in history

Warren Buffett's Berkshire Hathaway suddenly became a fintech investor - the company has invested about $600 million in payment systems operating in emerging markets, the WSJ found out . The deals violate two important rules of Buffett at once - do not invest in technology companies (with rare exceptions, such as Apple) and never buy shares at the IPO stage. Perhaps it's because the 88-year-old Buffett is trusting more and more decisions in the company to young managers.

Details

• Berkshire Hathaway has spent $600 million on investments in fintech in recent months. First, it bought shares in the parent company of the largest Indian payment service Paytm for $300 million, and last week participated in the IPO of the Brazilian payment system StoneCo, buying a stake in it for another $300 million.
• For Buffett's company, this investment is unusual in every way. First, the billionaire almost never invests in technology companies - he always said that he did not understand them well. There were only two exceptions - a successful investment in Apple (Buffett considers it not a technology, but a consumer company) and a failure in IBM (in 2018, Buffett sold all its shares and admitted that he was mistaken). The strong point of Berkshire Hathaway is investing in blue chips like Coca-Cola, insurance or infrastructure companies.
• Second, Buffett always warns investors against investing in companies during an IPO. “I do not remember a single case in the last 30 years when we would have bought at least one new issue of shares. There are thousands and thousands of businesses in the world, and this opportunity is not the most attractive, he told Berkshire Hathaway shareholders at the 2012 general meeting. “With an IPO, the seller has an advantage - he chooses the time to enter the market himself.”
• However, payment systems Stone and Paytm have at least two similarities to the businesses that Buffett likes to invest in - they dominate their market and operate in a regulated industry. Launched in 2014, Stone has become the fourth largest payment processor in Brazil in four years, and Paytm has more than 300 million users in the Indian market alone, surpassing PayPal's global reach.
• The deals also fit in with Berkshire's focus on new destinations. Buffett recently pointed out that the company needs to look for new areas where it can direct its accumulated $ 111 billion (as of July 2018) of cash. These new directions for the company are opened by two portfolio managers - Todd Koms (it was he who conducted both transactions in fintech) and Ted Weschler. To them, as well as to two vice presidents Ajit Jain and Greg Abel, 88-year-old Buffett this year began to transfer some of the authority to manage Berkshire Hathaway, while continuing to control the company.

An investment from a conservative company like Buffett's Berkshire is an indicator of the maturity of the fintech industry, writes the WSJ. In the first nine months of 2018 alone, the sector attracted about $35 billion in venture capital funds worldwide, according to Dow Jones VentureSource data.

Liana Faizova