Elon Musk Says Warren Buffett Missed Out On The Best Stock

Elon Musk doesn’t seem all that impressed with Warren Buffett’s S&P 500 stock picks. And he took to Twitter — of course — to say so.

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Responding to a March 26 post showing how Berkshire Hathaway‘s (BRKA) portfolio has grown from 1994 to 2022, Musk belittled the Oracle of Omaha’s performance. Musk tweeted, “Or he could have just invested in Tesla at $200M market cap when he had the opportunity to do so.”

According to Musk, Charles Munger, Buffett’s partner at Berkshire Hathaway, passed up on an opportunity in “late 2008” to invest in Tesla (TSLA) when it was only worth $200 million, Musk tweeted on Feb. 25. Tesla now is worth nearly $600 billion. And Berkshire Hathaway is sitting on more than $128 billion in cash and short-term funds to invest.

And that was a big mistake in Musk’s book. Musk is now worth $177 billion, making him the second-richest person in the world, says Bloomberg. And Buffett? He’s worth $105 billion putting him at No. 5.

Musk Vs. Buffett

Perhaps Musk, CEO of electric-vehicle maker Tesla (TSLA), feels slighted that his stock isn’t part of Buffett’s storied 63-stock portfolio. After all, Tesla is a 1.6% weight in the S&P 500, making it the eighth-most-important stock in that key index. (Keep in mind that Buffett owns a sizable stake of index funds that own the S&P 500).

Or maybe Musk is sore that Buffett owns two of Tesla’s chief rivals: Chinese electric-car maker BYD (BYD) and traditional vehicle maker General Motors (GM). Berkshire Hathaway owns 12% of BYD and nearly 4% of GM.

But there’s no question that 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. That’s a staggering 299,208% gain. Shares of Berkshire Hathaway in contrast are up 373% since then. Yes, that tops the S&P 500’s 339% rise in the same time, but it’s a far cry from what Tesla stock would have delivered.

Tesla Stock Vs. Berkshire Hathaway

So if Buffett didn’t buy Tesla in 2008, what did he buy instead? Electric utility MidAmerican Energy was a new position in 2008 and is now folded completely in Berkshire Hathaway’s energy unit. He also took a position in Swiss Re amid the financial crisis, says S&P Global Market Intelligence.

But it’s hard to imagine any jumps outstripping Tesla’s. Shares of Tesla are up 13,855% from their first day of trading in July 2010. During that time, Berkshire Hathaway’s shares are up just 289.6%. Again, that tops the S&P 500’s 264% gain, but only marginally.

Here’s the rub, though. Tesla’s returns may outstrip Berkshire Hathaway’s. But the hidden cost is turbocharged risk. Tesla shares cratered more than 45% from the S&P 500’s 2022 January peak to the 2022 low, for instance. Shares of Berkshire Hathaway, on the other hand, only fell 12.1% — which was half of what the S&P 500 lost in that time.

And that explains why 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, on the other hand, carries a beta of 1.65, or 65% higher risk than the market.

Buffett never said he’s perfect. “Over the years, I have made many mistakes,” he wrote in Berkshire Hathaway’s 2022 annual report. “Consequently, our extensive collection of businesses currently consists of a few enterprises that have truly extraordinary economics, many that enjoy very good economic characteristics, and a large group that are marginal.”

But Musk thinks he knows what Buffett should do with the billions he has sitting around. “Starts with a T … ,” he tweeted.

Tesla Vs. Buffett, By The Numbers

Sources: IBD, S&P Global Market Intelligence, * – based on “late 2008′ estimate from Musk Tweet

Follow Matt Krantz on Twitter @mattkrantz

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