Few stocks have outperformed the iconic “Magnificent Seven” in recent years. These elite seven have witnessed monumental share price growth, with some surging by almost 20,000% over the past decade.
Among the legendary seven, only one stock has faltered in the past three years – Tesla (NASDAQ: TSLA) saw its value plummet by approximately 16%.
A Contender Emerges
Despite the push by notable investors for Tesla’s removal from the Magnificent Seven, an intriguing $900 billion heavyweight is vying for the spot. While not as tech-centric as its elite peers, this company holds promise to breach the coveted trillion-dollar mark.
With a market cap hovering around $900 billion, Berkshire Hathaway (NYSE: BRK.A, BRK.B) stands tall as a potential challenger. A mere 13% price increase in its shares would propel it into the trillion-dollar realm, a milestone conceivably achievable this year.
Comparing Tesla’s $570 billion market cap to Berkshire’s figures, the latter aligns more seamlessly with the aura of the Magnificent Seven.
You may question – isn’t Berkshire more renowned for insurance rather than tech? The answer may catch you off guard.
Berkshire, at its core, boasts an insurance core intertwined with an investment body. While tech doesn’t dominate its DNA, a substantial chunk of its publicly-traded investment trove nestles in tech giants, including nearly $168 billion in Apple stock alone – almost 30% of Tesla’s present market cap.
And Berkshire’s tech entourage doesn’t end there. The conglomerate holds stakes in Amazon, Snowflake, Visa, Mastercard, HP, and even BYD – a direct competitor to Tesla in the EV space in China.
Although Berkshire may not be as tech-focused as the elite, its tech investments collectively amount to almost a quarter of its market cap, debunking the myth of its nonchalance towards tech.
Value Proposition
Comparing Tesla and Berkshire directly proves challenging due to their diverse revenue streams and valuation metrics. However, evaluating their standing relative to peers sheds light on their investment attractiveness.
While Tesla commands a premium compared to traditional auto manufacturers like Ford and Volkswagen, as well as relative newcomer Rivian, Berkshire’s valuation premium, though present, remains noticeably lower. The former trades at nearly 200% above Rivian on a price-to-sales basis, showcasing a stark contrast in valuation.
Reflecting on price-to-book values, Berkshire, despite its premiums to counterparts, remains reasonably priced – a testament to its enduring success track record. Meanwhile, Tesla’s lofty valuation, even post a significant decrease, positions it as a pricey investment compared to Berkshire.
Though Berkshire may not ascend to the Magnificent Seven’s echelons due to its tech inclination, its hidden zeal for tech investments should capture broader attention. As Tesla struggles to maintain an appealing valuation, Berkshire emerges as a prudent choice for your investment portfolio.
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