IBM Became a Buffet for Buffett

Aaron Holtzman November 15, 2011 0
IBM Became a Buffet for Buffett

Warren Buffett, billionaire investor of Berkshire Hathaway Inc., gobbled up $10.7 billion worth of shares from International Business Machines Corp.  This amounts to a 5.4% stake in IBM and the value has already increased to $12 billion, a 12% gain. 

Since March, Berkshire has been purchasing shares of IBM.  These purchases occurred when the overall financial market was very volatile, but while other companies were caught up in the upheaval, IBM prices surged 28% higher making it the fourth-biggest U.S. firm through market capitalization. 

The investment in IBM is iconic because it is the most Berkshire has ever pumped into a public company for a minority stake, showing that Buffett has a lot of faith in IBM’s management, strategy, and overall vision.  Buffett has remained out of the technology sector until now, primarily investing in insurance, finance, industrial, and consumer companies.  Although IBM has been trading near its all time highest price, Buffett was not skittish and believed that the company would continue to be successful. 

Jeff Mathews, a private investor at Berkshire Hathaway, believes that Mr. Buffett “probably sees IBM as a company that is hard to displace from the corporate world as Coke would be to displace from the consumer world”. 

And I believe you can take that to the bank.  With the technology industry booming, a safe bet would be with one of the leaders who have weathered many storms before and is poised to continue leading the industry.  IBM reminds me of RIM (research in motion) four years ago except IBM maintains good innovation and an entrenched market share, they just have stay the course.

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