 |
| Elon Musk Takes a Swipe at Warren Buffett, Says He Missed Out on the Best Stock |
Tesla CEO, Elon Musk, took to Twitter recently to criticize Warren Buffett's S&P 500 stock picks. In response to a post showing how Berkshire Hathaway's (BRKA) portfolio had grown since 1994, Musk belittled Buffett's performance. Musk tweeted that Charles Munger, Buffett's partner at Berkshire Hathaway, passed up on an opportunity to invest in Tesla when it was only worth $200 million in late 2008. Now Tesla is worth nearly $600 billion, and Berkshire Hathaway has missed out.
Musk seems upset that his stock isn't part of Buffett's storied 63-stock portfolio, especially given that Tesla is a 1.6% weight in the S&P 500, making it the eighth-most-important stock in that key index. Meanwhile, Buffett owns two of Tesla's chief rivals: Chinese electric-car maker BYD and traditional vehicle maker General Motors.
Investing in Tesla would have delivered Buffett-beating results. A $200 million investment made in Tesla at the end of 2008 would be worth $599 billion today, a staggering 299,208% gain. Shares of Berkshire Hathaway, in contrast, are up 373% since then. And although that tops the S&P 500's 339% rise in the same time, it's a far cry from what Tesla stock would have delivered.
However, the risk factor must also be considered. Tesla carries a beta of 1.65, or 65% higher risk than the market. In contrast, Buffett's Berkshire Hathaway sports an impressive beta of just 0.96, meaning it's slightly less risky than the market. A beta of less than 1 indicates less risk than the S&P 500. Tesla's returns may outstrip Berkshire Hathaway's, but the hidden cost is turbocharged risk.
In conclusion, while Elon Musk feels slighted that his stock isn't part of Buffett's storied 63-stock portfolio, it's worth considering the risks involved with Tesla's stocks. The hidden cost of Tesla's impressive returns is turbocharged risk, which may not be suitable for all investors. It remains to be seen whether Berkshire Hathaway will change its stance on Tesla, but the debate on Tesla's high-risk, high-reward potential is likely to continue.
