Warren Buffett, the billionaire stock picker and takeover specialist, said investors should be wary of valuations for social networking Web sites as some of the industry’s biggest companies prepare to sell shares.
“Most of them will be overpriced,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc, said in New Delhi on Friday.
“It’s extremely difficult to value social networking site companies,” he said, without specifying companies. “Some will be huge winners, which will make up for the rest.”
PHOTO: BLOOMBERG
Facebook Inc, owner of the most popular social-networking site, drew investors including Goldman Sachs Group Inc in private stock sales that valued the company at US$50 billion as of January. Groupon Inc, the Chicago-based daily deals site, has held talks about an initial public offering that would value it at as much as US$25 billion, two people familiar with the matter said earlier this month.
Twitter Inc, the microblogging site, said in December that it was valued at US$3.7 billion after receiving a US$200 million round of funding led by venture capital firm Kleiner Perkins Caufield & Byers. The company’s value may now be closer to US$5 billion, according to SharesPost Inc, a private-share exchange.
Buffett, 80, has shunned technology investments in favor of industrial, financial and -consumer-goods holdings in his four -decades at Omaha, Nebraska-based Berkshire. Traveling in India to review Berkshire’s operations and scout opportunities, he took questions at a meeting with insurance customers and spoke on topics from the economy to investments.
Buffett said investors should avoid long-term fixed-income bets in US dollars because the currency’s purchasing power would decline.
“I would recommend against buying long-term fixed-dollar investments,” Buffett said. “If you ask me if the US dollar is going to hold its purchasing power fully at the level of this year, five years, 10 years or 20 years from now, I would tell you it will not.”
Buffett has shortened the duration of Berkshire’s bond holdings since 2009 as the US Federal Reserve eased monetary policy to stimulate the economy. Over the same period, he has added to cash holdings and committed more than US$35 billion to company takeovers.
“I would much rather own businesses,” he said. “It’s very easy to take away the value of fixed-dollar investments.”
As of Dec. 31 last year, Berkshire owned about US$61.5 billion in stocks, US$34.9 billion in fixed-maturity securities and US$23 billion in “other investments.”
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