Berkshire Hathaway has a value-oriented bent so it's a surprise that it has poured $930 million in Bending Spoons, the richly priced technology conglomerate that has grown rapidly through acquisitions.
So far, Berkshire is winning. With Wednesday's rally in Bending Spoons stock, Berkshire is sitting with a profit of about $600 million, Barron's estimates.
Early in the day, Bending Spoons said Berkshire had bought $330 million in its stock on top of the $600 million that Berkshire invested at the company's July IPO. Berkshire declined to comment on the buy.
Berkshire now holds an estimated 31 million shares of the Italian company after its 10-million fresh purchase. Berkshire's IPO investment apparently hadn't been disclosed before Wednesday.
Bending Spending stock is up a lot on Berkshire's investment -- 38% to $52.31. Wall Street clearly views the purchase as an endorsement of Bending Spoons' growth strategy.
The company, based in Milan, has assembled a group of technology castoffs -- AOL, Brightcove, Eventbrite, and Vimeo -- and reached a $1.4 billion deal for Miro, an AI-focused tech company, in September.
Bending Spoons, however, isn't a cheap stock, trading for nearly 10 times forward sales based on its enterprise value -- market value plus debt.
The company has a market value of around $40 billion based on its share count implied in the disclosure in its news release on Wednesday, and it had about $4 billion of debt at the time of its IPO. The stock trades for about 30 times projected 2027 earnings.
Most of Berkshire's investments have a value orientation reflecting the philosophy of former CEO and Chairman Warren Buffett, who was a student of legendary 20th-century value investor Ben Graham.
Even Apple, Berkshire's biggest equity investment score and largest stockholding, was a value stock from 2016 to 2018 when Berkshire was buying it at under 15 times earnings.
Berkshire has gravitated toward the tech sector over the past year with its purchase of more than 100 million shares of Alphabet, including the buy of $10 billion of stock in June at below $350 a share. Alphabet's nonvoting shares now trade around $350.
Buffett orchestrated the Alphabet purchases, but it isn't clear who decided to buy Bending Spoons. CEO Greg Abel oversees the $350 billion equity portfolio with an assist from investment manager Ted Weschler, who runs about 6% of it. Buffett also weighs in, as the Alphabet buy shows.
One longtime Berkshire investor told Barron's that he was surprised by the latest Alphabet purchase since the stock trades for 10 times sales -- not 10 times earnings, the more typical Berkshire buy.
More typical for Berkshire has been its $2 billion investment in home builder Lennar, which has a depressed stock price and trades below book value. Also typical was Berkshire's 2020 original purchases of five Japanese trading companies for under 10 times earnings and below book value.
Whether Berkshire has any unique insight into Bending Spoons again isn't clear from outside the company. That might be why investors may not want to chase Bending Spoons stock after its run-up on Wednesday.
Many Berkshire holders would like to see the company invest more heavily in stocks given the company's $350 billion-plus in cash, but Bending Spoons was a surprise.
Some Berkshire holders would like to see the company take advantage of the selloff in large parts of the stock market this year to buy cheap stocks -- growth and value -- even as the S&P 500 is up almost close to 15% this year on strength in Mag Seven tech stocks. Bending Spoons doesn't appear to fit that bill.
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