Oracle of Omaha Goes Back On Own Advice - Invests Big in IBM

Warren Buffett gobbles up IBM stock.

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    NEWSLETTERS

    Chris Haston/NBC
    Photo by: Chris Haston/NBC

    Investor Warren Buffett says his company bought about $10.7 billion of IBM stock this year, giving it a stake of more than 5 percent stake in the technology company.

    Buffett revealed the investment during an interview on CNBC on Monday. Buffett's company, Berkshire Hathaway Inc., filed a full quarterly update on its U.S. stock portfolio Monday afternoon.

    Buffett has long refused to invest in high-tech companies because he has said it's too difficult to predict which technology businesses will prosper in the long run.

    But he said he recently changed his view of IBM based on what he read in the company's annual reports and what he learned by talking to IT departments at Berkshire subsidiaries. He said he should have realized years sooner that the heart of IBM's business is providing service and equipment to information technology departments.

    ``There's a fair amount of presumption in many places that if you're with IBM, you stay with them,'' Buffett said.

    So Berkshire bought about 64 million shares since March, or about 5.5 percent of IBM. Buffett says he believes IBM has a sound plan for the future.

    IBM officials declined to comment on Buffett's investment Monday morning.

    International Business Machines Corp., based in Armonk, N.Y., says it plans to continue growing its software business and invest about $20 billion in acquisitions between 2011 and 2015. IBM predicts that its operating earnings per share will top $20 by the end of 2015.

    IBM shares gained $1.71 to $189.09 in morning trading, approaching its 52-week high of $190.53 reached in mid-October.

    Buffett said Berkshire paid an average of about $170 per share for the IBM stock.

    Berkshire's investments are closely watched in the market because of Buffett's successful record. Buffett has said that Berkshire has been buying aggressively during the recent market turmoil.

    Buffett said Monday that Berkshire had been adding to its already sizeable stake in Wells Fargo, but he didn't say how many more shares had been bought recently. At the end of June, Berkshire held 352.3 million Wells Fargo shares. That was up from 342.6 million shares Berkshire held at the end of March.

    Monday afternoon's filing with the Securities and Exchange Commission may not reveal a full picture of Berkshire's investments because regulators often allow the Omaha-based company to conceal new investments for a time while building a position.

    Buffett said that the third-quarter report that will be filed Monday won't show all of Berkshire's new IBM stake because some of the shares were bought in the fourth quarter.

    Besides investments, Berkshire owns roughly 80 subsidiaries including insurance, railroad and utility firms.