Warren Buffett is widely regarded as the best investor in the world.
Through his investments, Buffett has become one of the richest people in history. Buffett has also donated tens of billions to philanthropy and built one of the largest conglomerates ever.
Given that investing alongside the ‘next Buffett’ could be a good idea, here’s who I think is the next Warren Buffett.
Who I think is the next ‘Warren Buffett’
While most people think of Buffett as an investor, he is really a capital allocator. He spots opportunities and allocates capital to potentially benefit from them, whether it be in the form of stocks, entire companies, or philanthropic initiatives.
The process is not unlike buying a stock for normal investors. If an investor thinks a stock could go up for various reasons (spotting an opportunity), they use capital to buy the stock. If things go the way the investor predicts, the stock goes higher and the investor benefits.
In terms of the best capital allocators, I would say that one person who can rival Buffett’s performance is Facebook (NASDAQ:FB) CEO Mark Zuckerberg.
Zuckerberg built a company that is actually bigger than Buffett’s Berkshire Hathaway by market cap. He is also in the same category as Buffett in terms of wealth and accomplishment. In terms of recent stock performance, Zuckberg has actually done better than Buffett. Over the past 10 years, Facebook has outperformed the S&P 500 by a fairly wide margin. Over the period, Berkshire Hathaway has performed roughly around the same as the S&P 500. I think there is a reason for this.
The world is increasingly digital and Buffett’s style of investing makes it harder to adjust to the increasingly digital/technology oriented landscape than Zuckerberg’s style. If you look at the world’s 10 most valuable companies by market cap, most of them are digital/tech oriented.
Zuckerberg ‘gets’ digital
One guy who I think ‘gets’ digital is Zuckerberg. Aside from building Facebook.com and making it popular, Zuckerberg has also made very smart digital acquisitions. He bought Instagram for Facebook for around $1bn, for example. According to many analysts, Instagram is worth more than 100x the purchase price. Facebook also bought Whatsapp, which has also increased substantially in value according to many estimates.
As a result of his efforts, almost two billion people use the digital platforms that Zuckerberg runs every day. Given that the world is increasingly digital and technology is rapidly advancing, I think Zuckerberg will have plenty of opportunities in the future to capture more growth and unlock more shareholder value.
Given Facebook’s numerous competitive advantages, I think Zuckerberg will continue to succeed in terms of benefiting from opportunities. I think buying shares of Facebook gives me an opportunity to benefit from Zuckerberg’s smarts.
Even better, Facebook is also trading at what I think is a fair valuation. Despite all of the company’s competitive advantages and Facebook’s network effects, the company has a forward price-to-earnings ratio of 25.82. Although Facebook could face more regulation in the future, I think the upsides make the stock more than worth it.
As Buffett himself has said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Jay Yao has no position in any of the shares mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares) and Facebook and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.