Actually, this is the age old debate between growth and value investing or Silicon Valley against Benjamin Graham.
In short, I think a loss making technology company has value if its sales revenue has grown by more than 20 % in the last three years, controls its cost base well and can show clear projections that it can become profitable soon, that is 5 years at the most. However, all this is nothing if the technology company in question has no discipline.
The money creation or more simply put money printing by central banks in the last 12 years has created more than 10 trillion USD of new money all over the world. I can understand technology start-up founders -> they adhere to the "move fast, break things" Moto of Mark Zuckerberg, founder of Facebook, later renamed to Meta.
However, "moving fast" or almost at lightning speed means you do not have a lot of time to plan. And when you do not have time to plan, costs can easily be misjudged and the cost base can spiral out of control. Meta, Twitter, Amazon, Oracle and many technology companies showed lack of discipline, overhired people and now the whole of Silicon Valley is firing, putting on the street more than 200 000 people. It is interesting what the tech CEOs, directors and finally managers explain to the people they re letting go: "Oh, we over-hired, we are sorry we are "throwing you out on the street". This is a business decision." 😀😢
The problem with this line of thought is that in the next (several) rounds the "cutting" managers, directors and CEOs will be the ones that are cut, because many of the niche technology firms and some of the most famous, household corporations in information technology today simply will not survive.
However, it still makes sense to invest in technology companies, in my personal opinion. In the long-term, though.
I personally think the next few years will be prime time for dividend yielding stocks. Or Warren Buffet will come in his prime. It is interesting to note, though, that Warren Buffet has said numerous times that he prefers to invest in companies that are reinvesting their profits and not distributing dividends. Berkshire Hathaway, the conglomerate controlled by Warren Buffett also does not distribute dividends.
And in the same time Berkshire Hathaway, under the guidance of Warren Buffett invests its cash reserves to a large extent in high dividend yielding stocks like Coca Cola, JP Morgan, Citigroup, Bank of America, American Express, Moody's etc. One has to think. 😀
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