"It's a company that helps IT departments do their job better. There is a lot of continuity to it. Buffett said this about IBM, explaining how the investment went against his no-tech-company rule because he'd been hit between the eyes by how IBM finds and keeps clients, demonstrating the company's ability to maintain customer relationships and recurring revenue streams."
"Buffett didn't view Apple as a tech company. Instead, he viewed it as a consumer product firm with a powerful brand and an even stronger ecosystem. After all, millions of us loyally stick with Apple products, which creates recurring streams of income. Plus, Apple's iPhone had high switching costs and a user ecosystem, resembling a moat he would hunt for."
"Berkshire Hathaway took a $4.3 billion stake in Alphabet thanks to the company's network effect. In Plain English, Alphabet became more valuable the more people used it. Millions of people use it, creating a powerful competitive advantage that aligned with Buffett's investment criteria for durable business models."
Warren Buffett historically avoided technology stocks because he preferred investing in companies he understood with slow-moving competitive advantages and predictable cash flows. Starting in 2011 with IBM, he began reconsidering tech investments when he identified companies with durable business models and strong customer loyalty. He viewed Apple not as a tech company but as a consumer brand with ecosystem lock-in and recurring revenue. His subsequent investments in VeriSign, Amazon, and Alphabet were driven by recognizing their powerful competitive moats—whether through switching costs, network effects, or customer ecosystems—that aligned with his core investment philosophy of buying understandable businesses with sustainable advantages.
#warren-buffett-investment-strategy #competitive-moats-and-business-advantages #technology-stock-investing #consumer-brand-loyalty #network-effects
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