Why Elon Musk’s Recent Investment Advice Sounds Like Warren Buffett

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Tesla CEO Elon Musk and legendary investor Warren Buffett might disagree on the long-term value of cryptocurrencies, but they seem to share the same principles when it comes to investing in them. stock Exchange.

Musk, the richest person in the world according to the Bloomberg Billionaires Index, offered investment advice in a tweet on sunday:

“Since I have been asked a lot: buy shares in several companies that manufacture products and services that you believe in. Only sell if you think their products and services tend to deteriorate. Don’t panic when the market does.”

The tweet echoes the principles of value investing made famous by Buffett, currently the sixth richest person in the world.

With value investing, you only buy the stocks of companies that have a business model that you believe in and understand. Ideally, these companies are undervalued and have the potential to generate higher profits over a long period.

Since value investors seek out trades based on their own research into a company’s intrinsic value, they don’t tend to follow trends or short-term stock movements in the market.

For Musk, then, Twitter is likely a value investment based on that logic, as the company’s board recently accepted his offer to buy the company for $44 billion. He said he wanted to “unlock” the “enormous potential” of the social media website, in a statement announcing the deal.

Tweeting, “don’t panic when the market does,” Musk also echoes one of Warren Buffett’s most famous quotes about not following the crowd, even when the market is down: “Be greedy when others are afraid, and fearful when others are afraid”. greedy.”

In March, Musk too tweeted that in times of high inflation, it’s “usually better to own physical things like a house or shares in companies that you think make good products,” than to keep your money in cash.

However, he added that “I still own and will not sell my Bitcoin, Ethereum or Doge”, in reference to his cryptocurrency holdings.

At Berkshire Hathaway’s annual shareholders meeting on Saturday, Buffett – who once called Bitcoin “probably a rat’s death squared” – said he still wouldn’t invest in the cryptocurrency, despite its growing acceptance, because “it is not a productive asset and it is not”. produce nothing tangible.”

While Musk and Buffett might disagree on the long-term outlook for cryptocurrency, Musk also warned people not to “bet the farm on crypto” in an earlier tweet, adding that “true value is creating products and providing services to your fellow human beings, not money in any form.”

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