Buffett buys big stake in IBM

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Warren Buffett has always made his distaste for technology investments clear, but on Monday he changed his ways in spectacular fashion.

The Berkshire Hathaway chief executive said he has bought nearly $11 billion of International Business Machines Corp. stock in the past eight months, building a 5.5 percent stake that potentially makes him the company’s largest shareholder.

It was a surprise reversal for Buffett, who has always said he would not invest in technology because he largely did not understand it. But in an interview on CNBC, Buffett said he was struck by IBM’s ability to retain corporate clients, which made it indispensable in a way that few other services are.

“It’s a company that helps IT departments do their job better. It is a big deal for a big company to change auditors, change law firms” or to switch to a new technology vendor, Buffett said.

“I don’t know of any large company that really has been as specific on what they intend to do and how they intend to do it as IBM,” said Buffett, who teased CNBC’s reporters for a few minutes with a guessing game about the investment.

IBM shares, which have a market value of about $220 billion, were up 0.2 percent to $187.79 in afternoon trading. Earlier, they hit $189.84, nearing the all-time high of $190.53 that the stock touched in mid-October.

Buffett, known as one of the best value investors of all time, appeared to have come to IBM late in the game – a year ago the stock was a third lower than it is now. Buffett himself said he should have paid more attention to IBM five years ago.

Yet technology analysts said he had still gotten a good deal.

“Maybe he could have gotten a better price ... but if you look at Warren Buffett’s investment policy I would assume this is a long term investment,” said Collins Stewart analyst Louis Miscioscia. “This is not your father’s IBM; the management has done a good job of cost control, returning cash to shareholders.”

GROWING PORTFOLIO

OMAHA, Neb. — Warren Buffett’s company revealed new stakes in Intel, DirecTV, General Dynamics and CVS Caremark to accompany Berkshire Hathaway Inc.’s headline-making investment in IBM.

Berkshire disclosed the new investments Monday in a quarterly update it filed on its U.S. stock holdings.

Berkshire estimates that each of the new investments, besides IBM, were worth less than $200 million at the end of September. That figure suggests those investments were made by Berkshire’s new investment manager, Todd Combs, who manages between $1 billion and $3 billion.

It’s not clear who picked the investments because the filing doesn’t differentiate between investments Berkshire makes, investments any of roughly 80 subsidiaries make or investments made by Buffett himself.

– Associated Press


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