Why Warren Buffett Will Never Buy Facebook Inc or Twitter Inc

Warren Buffett has said he'll never invest in Facebook or Twitter, and the reason why will surprise you.

Jul 16, 2014 at 7:09AM

Warren Buffett knows some social networking stock will see their values skyrocket in the years and decades to come. And even though he has his own account on Twitter (NYSE:TWTR), there's one simple reason why he won't put a single dollar of Berkshire Hathaway's (NYSE:BRK-A)(NYSE:BRK-B) money into it, Facebook (NASDAQ:FB), or their peers.

Is this because he's bitter he missed out on some of the greatest gains over the years by not investing in the hot growth stocks of years past? Or does it have to do with the fact Buffett has long been a fan of stocks that are "on sale," which certainly would not describe the incredibly lofty valuations seen at Facebook and Twitter at the moment?

Actually, neither. The reason is that Buffett has no real way to gauge the actual value of these social media stocks.

Consider what he said the 2001 letter to Berkshire Hathaway shareholders as the market began to watch the dot-com bubble burst: "At Berkshire, we make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We're not smart enough to do that, and we know it."

More recently, as shown in the video below, Buffett noted that he has been successful because he sticks to industries and companies he's most comfortable with. These are also the sectors he understands and for which he can determine a true value.

For some, this means sticking to the sectors they know and can grasp, whether it's banking, technology, or energy. Some of those stocks will make for great investments. For others, it means trusting in the broader power of the stock market, and diligently saving and investing into index funds.

Put simply, Buffett said Twitter and Facebook aren't "on the list" of companies he understands and feels comfortable pegging a value to. As a result, he'd never buy them, but he'd never short them, either.

Like Buffett, whenever we're buying stocks, we must always ensure we truly grasp not only the business of the company, but its true value.

Warren Buffett: This new technology is a "real threat"
While he may never invest in Facebook or Twitter, at the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on by clicking here to access a FREE investor alert on the company we're calling the "brains behind" the technology.


Patrick Morris owns shares of Berkshire Hathaway and Twitter. The Motley Fool recommends Berkshire Hathaway, Facebook, and Twitter. The Motley Fool owns shares of Berkshire Hathaway and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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