Chip Somodevilla | Getty Images
in Google In their IPO prospectus 21 years ago, founders Larry Page and Sergey Brin gave a flattering nod to Warren Buffett, and in a letter to prospective investors they suggested the billionaire investor had significant influence.
They titled their letter to the founders “‘Owner’s Manual’ for Google Shareholders,” suggesting there were footnotes worth reading.
“Much of this content was inspired by Warren Buffett’s annual report essays and Berkshire Hathaway’s ‘owner’s manual’ for shareholders,” the footnote says.
More than 20 years later, Buffett is showing that praise goes both ways. Berkshire HathawayBuffett’s holding company disclosed late Friday that it owns a stake in parent company Google. alphabet At the end of the third quarter, it was worth approximately $4.3 billion, making it the company’s 10th largest holding. This is one of Berkshire’s most significant technology investments in years. apple’s is the company’s largest holding, and Alphabet shares rose 3% on Monday.
This is an unusual move by Berkshire, which has been reluctant to acquire high-growth tech companies for decades, and marks the first time it is known that it has a stake in Google. Buffett, 95, will step down as CEO at the end of this year and be replaced by longtime vice president Greg Abel.
In 2017, Buffett said he regretted not buying Google stock years ago when Berkshire’s insurance subsidiary Geico was paying high prices for advertising on its network. he also AmazonBerkshire ultimately acquired it in 2019 and still owns $2.2 billion worth of e-commerce stock.
Alphabet stock is up 50% since the beginning of the year after Monday’s rally and is trading just shy of its all-time high reached last week. The company hit $100 billion in revenue for the first time in the third quarter due to growth in its cloud division, which houses artificial intelligence services. The cloud division also has a $155 billion backlog from customers and a modern chip line that sets it apart from other AI players.
Alphabet’s valuation remains lower than its AI-driven mega-cap peers. The company’s stock trades at about 26 times next year’s earnings, compared with Microsoft’s 32 times, Broadcom’s 51 times and Nvidia’s 42 times, according to FactSet.
Mr. Page and Mr. Brin currently rank 7th and 8th, respectively, on Forbes magazine’s list of billionaires, behind Mr. Buffett at No. 6.
Google’s founders quoted Buffett multiple times in the company’s IPO prospectus. In one instance, Mr. Page and Mr. Brin effectively warned investors that quarterly results did not always look pretty.
“In our opinion, external pressures too often cause companies to sacrifice long-term opportunities to meet quarterly market expectations,” they wrote. “In the words of Warren Buffett, “We’re not going to ‘smooth out’ our quarterly or annual results. If the profit numbers are bumpy when they arrive at headquarters, they’ll likely be bumpy when they reach you. ”
In explaining the logic behind the dual-class stock structure that gave founders extraordinary voting rights, they cited Berkshire as one of the companies that had previously successfully implemented it, along with media companies such as: new york timesThe Washington Post (a newspaper now owned by Jeff Bezos), The Wall Street Journal publisher Dow Jones (a newspaper now owned by Jeff Bezos) News Corp. )
“Media observers have noted that dual-class ownership allows these companies to focus on their core long-term interest in critical coverage, despite fluctuations in quarterly results,” Page and Brin wrote. “Berkshire Hathaway also implemented a dual-class structure for similar reasons.”
WATCH: Berkshire unveils new alphabet states worth $4.3 billion.
