Very few people have the power to impact entire sectors of the economy with their words. Even the most respected market analysts have a limited influence on investors’ behavior. However, when Warren Buffett has an opinion, the financial world takes notice. A signal from him can boost share prices or send them in a downward spiral. After all, he is one of the most successful investors of all time.
When cryptocurrency was still a fringe concept, Buffett barely acknowledged its existence. Then, in late 2017, a spike in the price of Bitcoin made the asset class impossible to ignore. During the 2018 shareholder meeting for his company, Berkshire Hathaway, Buffett didn’t pull any punches. He thoroughly dismissed cryptocurrency as “probably rat poison squared,” and he went on to add, “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”
Is Warren Buffett Invested in Bitcoin?
In the years that followed, Buffett didn’t waver on his cryptocurrency stance, despite its soaring value. When other market gurus like ARK Invest’s Cathie Wood stated unequivocally that the future is in crypto, Buffett carried on with his unapologetic avoidance of holdings associated with blockchain technology.
That was no surprise, considering he had said in no uncertain terms that “We don’t own any, we’re not short any, we’ll never have a position in them.”
What did come as a surprise was the February 2022 release of Berkshire Hathaway’s most recent SEC filing. In what appears to be a change to its previous strategy, Berkshire Hathaway invested $1 billion in Brazil’s Nubank, adding to the $500 million it put into the company prior to its December 2021 IPO.
Is this a complete reversal of Warren Buffett’s anti-cryptocurrency stance? Is Warren Buffett in crypto now? Perhaps not, from a purely technical perspective. But the decision to add these holdings to Berkshire Hathaway’s portfolio does point to a new appreciation for the possibilities that cryptocurrencies represent.
Is Nubank TAM $1 Trillion?
The Latin American economy is growing at breakneck speed. The market’s population is more than 652 million, which means tremendous opportunity for companies that can offer the sort of technology-based products and services that have been driving established economies for decades.
Fintech companies are capitalizing on the unmet banking needs of Latin Americans. Many people don’t have access to banking services at all, and until recently, those who needed such services were limited to the five traditional financial institutions that controlled between 70 percent and 85 percent of Latin American deposits and loans.
Nubank is a fintech platform that offers the sort of digital products, services, and support that have become wildly popular in the United States and elsewhere. Consumers can open deposit accounts, credit cards, investment accounts, and more online.
So far, Nubank has more than 48 million users, and its market share is growing at a rapid rate. It holds seven percent of market share today, and all signs point to continued success in attracting and retaining clients.
Among other advantages Nubank offers, its customers seem delighted with the convenience and simplicity of online financial services, and they are saving on fees as compared to traditional Latin American banks. By some estimates, Nubank’s total addressable market is almost $1 trillion, which indicates that it probably won’t be long before shareholders start to see profits.
Is Nubank Crypto-Friendly?
Nubank doesn’t currently allow customers to trade cryptocurrency, so why has the fact that Warren Buffett owns Nubank stock prompted investors to ask whether Buffett is in crypto?
Essentially, Nubank presents a departure from Buffett’s anti-crypto stance because its investment platform, NuInvest, gives customers access to crypto exchange-traded funds (ETFs).
In other words, the company’s revenue relies, in part, on cryptocurrency. That’s a big deal for Buffett, who has traditionally avoided fintech companies with crypto exposure. So:
- Is Nubank crypto-friendly? Yes.
- Does that mean Buffett is invested in Bitcoin? No.
But Berkshire Hathaway’s Nubank holdings are the closest he has ever come.
How To Invest In Cryptocurrency
Until recently, trading Bitcoin and other cryptocurrencies required opening a dedicated account with one of the few crypto firms operating online – for example, Binance, Coinbase, FTX, Gemini, or Kraken.
As crypto trading became more popular, a variety of mainstream financial services platforms like Robinhood and PayPal began offering access to cryptocurrency.
Investors who are interested in adding cryptocurrency to their portfolios have a long list of options beyond buying Bitcoin or another cryptocurrency directly. For example, there are a number of ETFs dedicated to crypto and the underlying blockchain technology, like the ones offered to NuInvest customers.
Some of the best cryptocurrency and blockchain ETFs include:
- Bitwise 10 Crypto Index Fund (BITW)
- Bitwise Crypto Industry Innovators ETF (BITQ)
- Global X Blockchain ETF (BKCH)
- Grayscale Bitcoin Trust (GBTC)
- Grayscale Ethereum Trust (ETHE)
- ProShares Bitcoin Strategy ETF (BITO)
- Siren Nasdaq NexGen Economy ETF (BLCN)
Alternatively, investors can choose shares in companies with heavy cryptocurrency exposure, like Nubank, PayPal, and Square (Block), which ensures portfolios enjoy some of the gains associated with cryptocurrency without the high risk and volatility that comes with holding the coins directly.
What Is Warren Buffett’s Strategy?
It is unusual for Warren Buffett and his company, Berkshire Hathaway, to get involved in IPOs, and he is certainly not known for jumping into the latest high-growth tech stocks. In fact, aside from his interest in Nubank, Buffett has only participated in one IPO – the 2020 debut of cloud-based data-warehousing company Snowflake.
Instead, Buffett typically chooses companies with a long history of solid performance that have demonstrated their ability to weather economic ups and downs. Once Buffett has identified solid companies that can be relied upon for consistent long-term growth, he examines their fundamentals and makes decisions with value in mind.
His goal is to get a good company that is trading below its intrinsic value, which puts him squarely in the category of value investor.
What Stocks Does Warren Buffett Own?
Through this value-based strategy, Warren Buffett built a Berkshire Hathaway portfolio that is nearly devoid of startups and speculative ventures. As of December 31, 2021, Its top ten holdings included:
- Apple
- Bank of America
- American Express
- Coca-Cola
- Kraft Heinz
- Verizon Communications
- US Bancorp
- Moody’s Corporation
- BYD Co.
- Chevron Corporation
Though Buffett stays away from the sort of stocks that deliver stunning growth the moment they hit the market, Berkshire Hathaway’s share prices continue to rise. The company reported record-breaking profits for 2021, and Buffett clearly believes that success will be ongoing, as Berkshire Hathaway repurchased a record $27 billion of its own shares over the course of the year.
Berkshire Hathaway’s Nubank holdings are certainly a departure from the sorts of financial institutions that Buffett has selected in the past. More importantly, the decision to invest in a crypto-friendly financial services platform takes Buffett closer to what he once called “rat poison squared.” However, since Nubank amounts to just 0.2 percent of Berkshire Hathaway’s total portfolio, it is too soon to say that Buffett’s stance on crypto has truly changed.
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