Warren Buffett revealed this week that his holding company, Berkshire Hathaway, had amassed a 5.5% stake in tech giant IBM worth $10.7bn. The legendary investor said that he began buying the shares in March. The Securities & Exchange Commission had allowed him to keep the purchases secret for several months. Major investors are sometimes granted such confidential treatment, which prevents stock prices running away from them as the public piles in.
What the commentators said
Buffett’s move raised eyebrows: he has said that he doesn’t invest in technology firms because he doesn’t understand their businesses. Chalk it up to “the evolution of the world’s best-known computing business”, said David Prosser in The Independent. The 100-year-old firm used to be a personal computer maker. Now it’s a global provider of software and IT services to businesses and governments. So it’s hardly a traditional tech stock anymore.
Moreover, its worldwide footprint and growing focus on higher-margin services and consulting has allowed it “to build the sort of semi-monopolistic market power that Buffett seeks in his investments”, said Economist.com. IBM also boasts plenty of free cash flow, a dividend, stable management and a clear long-term strategy. It also looks reasonably valued. In short, said Agnes T Crane on Breakingviews, IBM has “all the sorts of characteristics” that attract the Sage of Omaha.