Sage of Omaha secretly builds up stake in IBM

The Sage of Omaha and Berkshire Hathaway chief executive 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.

Mr 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.”

The move 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.

Mr Buffett said he had bought about 64 million shares of IBM, paying $10.7bn. Berkshire started buying the shares in March, with a goal of building a $10bn position, he said.

Mr 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.

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

Berkshire was due to make a quarterly report of its equity holdings last night. Though it started buying IBM shares in March, Mr 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 yesterday.

According to Thomson Reuters data, a 5.5 per cent position in IBM would tie Mr Buffett with State Street Global Advisors for the largest stake in the company. IBM shares rose nearly one per cent in pre-market trading.

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

Mr Buffett also said that he would need to understand European banks better before investing in them, and that he has not yet seen an investment opportunity there in which he wants to take part.

He said he expects Europe’s economy to show improvement 10 years from now but that getting there will be difficult.