Changing sentiment towards the blend of finance and technology, commonly referred to as the Fintech sector, has now seen Warren Buffet investing $600 million into the industry, according to a Wall Street Journal article published October 30, 2018.
Investment Details
The money is split between two large companies in emerging markets. One is the payment processor StoneCo. LTD in Brazil and the second is India’s largest mobile payment service Paytm.
The investment choices are very unlike Buffet, who usually prefers large cap, blue chip stocks within his area of expertise of agriculture and house brand goods. However, both of his most recent choices are large in their respective markets and dominate the industry. As such, they align with Berkshire Hathaway’s typical “safe bets” and long-term investment perspective.
Because technology is outside of Buffet’s playing field, both investment deals were performed by Todd Combs, one of the two portfolio managers that work for Buffet’s company Berkshire. “Todd and Ted bring additional expertise to the table,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a Berkshire shareholder:
“They’re broadening the perspective of Berkshire and broadening the opportunities where they would look to invest.”
Berkshire has been looking for new opportunities to invest their cash, with over $100 billion sidelined in their accounts.
Changing Opinion of Financial Technology
With companies like PayPal ushering in the Fintech industry, others have quickly piled on. A reported $35 billion in venture capital funding has already been raked in this year alone.
Similarly, Bitcoin companies like Coinbase and Bitmain are also attracting much wider global investor attention. The next logical step for investors after buying into the infrastructure is now to buy up the tokens themselves.
Berkshire’s changing attitude could be a signal for other purchases within the sector to come. While unconfirmed, it isn’t farfetched to suspect Combs may flow some of Berkshire’s funds into Bitmain’s upcoming IPO or another significant venture capital opportunity.
With the cryptocurrency market under control by the bears, now would be an excellent time for those looking to diversify their portfolio to enter into long positions to capture on the profit of the inevitable rise back up.
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