Ascending to the pantheon of the “Magnificent Seven” is no simple feat for stocks in the modern investing landscape. Boasting growth rates exceeding 400% over the last decade, with some even reaching stratospheric gains of nearly 20,000%, the elite club demands nothing short of stellar performance.
Currently, only one among this illustrious group has faltered in recent years – the enfant terrible, Tesla (NASDAQ: TSLA), nursing a 16% dip in share value over the past three years.
As anticipation mounts for Tesla’s exclusion from this coveted cohort, whispers among prominent investors like Jim Cramer are growing louder. While Tesla’s successor remains uncertain, the emergence of a $900 billion behemoth brews at the horizon – a contender primed to vie for a seat amongst the trillion-dollar titans.
Championing the Trillion-Dollar Throne
In a realm dominated by technological stalwarts, the current luminaries of the Magnificent Seven – Alphabet, Meta Platforms, Apple, Amazon, Nvidia, and Microsoft – stand as testament to the tech-centric zeitgeist. Diverging from this path, Tesla’s demure stature under the $1 trillion mark evokes curiosity.
However, a silent contender awaits its moment of ascension – Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) – poised at a commanding $900 billion valuation. With a mere 13% surge in share price, this venerable entity could soon step into the trillion-dollar echelon.
Comparatively, Tesla’s $570 billion market cap appears robust, but in the symphony of colossal valuations, Berkshire aligns more harmoniously with the essence of the Magnificent Seven.
BRK.B market cap data by YCharts.
Yet, one might ponder – how does Berkshire fit among the tech elite compared to Tesla?
Peering beneath the surface unveils Berkshire’s essence – an insurance nucleus enveloped by an investment arm. While technology might seem an adornment, Berkshire’s principal gem in its investment diadem shines with a Magnificent Seven gem: Apple. This stake, valued at approximately $168 billion, outstrips Tesla’s current market cap by almost 30%.
Delving deeper, Berkshire’s tech repertoire extends beyond Apple to include stakes in Amazon, Snowflake, Visa, Mastercard, HP, and Nu Holdings – totaling over $8.1 billion. Notably, the conglomerate’s $2.4 billion bet on BYD, a Chinese electric vehicle rival to Tesla, adds an intriguing layer to their tech narrative.
Although decidedly less tech-focused than its brethren, the tech tapestry interwoven within Berkshire’s holdings exceeds $200 billion – a substantial fraction of its market cap, anchoring it as a stealth player in the tech arena.
An Investment Worth Considering
Comparing Tesla and Berkshire head-on proves challenging. Divergent revenue streams demand distinct valuation metrics. However, benchmarking their valuation against industry peers offers a clearer perspective.
Against traditional automakers like Ford, General Motors, and Volkswagen, Tesla’s lofty valuation emerges starkly. Even within the electric vehicle realm, Tesla maintains a premium perch above competitors like Rivian.
TSLA PS ratio data by YCharts; PS = price to sales.
While Berkshire commands a premium over its peers, the disparity is notably smaller. Trading at a 20% to 50% premium on a price-to-book basis, Berkshire’s valuation stands in stark contrast to Tesla’s prodigious 200% premium compared to Rivian based on price-to-sales metrics.
Eclipsing the celestial realm of the Magnificent Seven might elude Berkshire’s grasp due to its tempered tech focus. However, the hidden tech thread woven within its tapestry highlights a compelling narrative.
Despite Tesla’s exorbitant valuation, Berkshire Hathaway presents a reasonably priced alternative, underscored by its rich legacy of prosperity. While unseating Tesla from the Magnificent Seven might not be imminent, positioning Berkshire in your portfolio merits serious contemplation.
Curious about investing $1,000 in Berkshire Hathaway?
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