In the wake of Google's reorganization announced Monday, Google executives and some outsiders likened the new company's structure to Warren Buffett's Berkshire Hathaway.
But that's not an apt comparison,
says New York magazine writer Annie Lowrey.
Google is turning into a holding company called Alphabet. The biggest unit will be Google, encompassing search, advertising and YouTube. Other units include ones focused on extending human longevity, investments in other companies and driverless cars.
So does that mean it’s a diversified conglomerate, just like Berkshire Hathaway? "There are real limits to the Berkshire analogy," Lowrey writes.
"Warren Buffett’s conglomerate is a true conglomerate, with a big insurance business, a big railroad business, a big airplane-parts business, a big underwear business, and a big candy business." Lagging performance in one unit can often be cancelled out by strong performance in another.
But, "Alphabet is really Google plus businesses that Google subsidizes or provides the capital to invest in—including some 'moonshots,' in Silicon Valley parlance—that will either turn into giant, world-changing businesses or never make a dime."
That's a far cry from Berkshire's balanced diversification.
Berkshire shares have returned 8.2 percent over the last year, compared to 16.7 percent for Google and 9.8 percent for the S&P 500 index.
Elsewhere on the Buffett front, according to one of his favorite metrics, Chinese stocks aren't overvalued, despite the 78 percent return of the Shanghai Composite Index over the past year.
China's market has been whipsawed by violent moves in both directions recently, with the Shanghai index dropping 25 percent since June 12. "But volatility has never scared away Buffett,"
write Stephen Gandel and Stacy Jones of Fortune magazine.
About 15 years ago, Buffett offered his favorite measure for determining whether stocks are fairly valued. It's a ratio of the entire stock market's value to GDP. Buffett sees a ratio of 70 to 80 percent as a buying opportunity, and a reading over 133 percent as a sign of overvaluation.
Buffett's gauge now "offers a surprisingly positive message [for China], especially compared to what it is saying right now about the U.S.," Gandel and Jones explain.
Through July 28, the ratio stood at 110 percent for China, and 125 percent for the United States, they calculate.
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