Musk’s Challenge to Buffett: Will He Swap Apple for Tesla?

Elon Musk, CEO of Tesla, has attracted global attention by recommending investment in Tesla to Warren E. Buffett, CEO of Berkshire Hathaway.

On the 6th, Musk responded to a user’s post on his X (formerly Twitter) account, which suggested that “Apple’s stock has risen enough” and that “Buffett should dispose of Apple’s stock.”

He wrote, “Buffett should stake his claim in Tesla,” effectively recommending Buffett to invest in Tesla.

Musk’s confidence stems from Buffett’s recent announcement at the annual shareholders’ meeting that he sold about 13% of Apple’s shares in the first quarter of this year.

Over the past six years, since 2016, he has purchased $36 billion worth of Apple shares. The valuation of these shares is $16 billion, and Buffett receives an annual dividend of $775 million from Apple.

When Buffett suddenly sold Apple, speculations arose about his negative outlook on Apple’s future. However, Berkshire Hathaway clarified that the stocks were sold due to tax reasons.

However, local experts have analyzed that Buffett would not buy Tesla’s stocks.

Buffett has consistently shown a lack of enthusiasm for the automobile industry. At last year’s shareholders’ meeting, he stated, “Investing in the automobile industry is too difficult.”

Moreover, Buffett’s long-time partner Charlie Munger had already advised Buffett to invest early in China’s electric vehicle company BYD, yielding significant profits. Therefore, further investment in the automotive sector is unlikely.

According to the American economic comprehensive media group MarketWatch, Tesla’s current financial structure is far from the stocks Buffett typically invests in.

Buffett is well known for preferring corporate stocks whose usual value and cash flow come from production. In technical terms, he prefers stocks with low price-to-book ratio (PBR) relative volatility (Beta), and high dividend propensity and net income growth rate.

However, Tesla has only a high net income growth rate. Its PBR is higher than 88% of the S&P500 stocks, its volatility is greater than 94%, and no dividend is paid.

Meanwhile, Tesla’s stock price closed at $184.76, up 2% from the previous trading day, while it closed at $181.71, down 0.91% on the same day.

The rise in Tesla’s stock price is attributed to the unveiling of the new Model Y, while the fall in Apple’s stock price is accredited to the news of Buffett’s sale.