Buffett builds $ 10.7 b stake in IBM

Wednesday, 16 November 2011 01:20 - - {{hitsCtrl.values.hits}}

REUTERS: Warren Buffett said his Berkshire Hathaway Inc has accumulated a 5.5 per cent stake in IBM, the billionaire investor’s biggest bet in the technology field he has historically shunned.

Buffett said he was convinced by IBM’s long-term roadmap and by its entrenched position with major businesses – part of the durable competitive advantage that he looks for when investing in a company.

“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,” Buffett told CNBC in an interview.

The move also puts Buffett’s money squarely in the heart of the technology industry, a sector he has steadfastly avoided on the grounds he simply did not understand it.

Buffett said, in a CNBC interview on Monday, he had bought about 64 million shares of IBM at a cost of $ 10.7 billion. Berkshire started buying the shares in March, with a goal of building a $ 10 billion position, he said.

Buffett said IBM did not know that he was building a stake and that the company was finding out about his investment for the first time as he disclosed it on television.

An IBM spokesman declined to comment. He said he has always looked at IBM’s annual report – his preferred method of identifying companies to invest in – but this year “I read it through a different lens”.

Buffett said follow-on conversations with various technology executives throughout the Berkshire conglomerate convinced him to start building the stake.

Berkshire is due to make a quarterly report of its equity holdings on Monday night. Though it started buying IBM shares in March, Buffett’s comments suggested Berkshire did not cross reporting thresholds on the investment until the third quarter, which let him keep the stake secret until Monday.

According to Thomson Reuters data, a 5.5 per cent position in IBM would tie Buffett with State Street Global Advisors for the largest stake in the company.

IBM shares rose nearly one per cent in premarket trading.

Buffett, known as one of history’s great value investors, appears to have gotten into IBM late in the game.

By early March, when he started buying the stock, the shares had risen more than 25 per cent from their most recent low of six months previously. Even the stock’s lowest point during the third quarter, when Buffett built the rest of his stake, was one of its highest levels ever.

At a Friday close of $187.38, the stock is nearing analysts’ median price target of $200, according to Thomson Reuters data.