Buffett, IBM and Key Economic Characteristics

Berkshire’s Investment in IBM

Berkshire Hathaway started buying IBM shares during 2011, and has since increased its IBM investment. See table below for data of Berkshire’s IBM investment in 2014 compared to 2013. The one thing that did not increase during 2014 was the market value of the IBM investment. All other metrics showed a positive change.


No Surprises at IBM: Buffett

See here for the interview of Warren Buffett from CNBC quoted below.

[BECKY QUICK] Why are you buying more IBM?

[WARREN BUFFETT] Well, I buy it because I like it. It’s kind of been doing exactly what I like since we first started buying it. […] There’s been no surprises at IBM since we started buying a few years ago. […] The pleasant surprise is that the stock has been going down.

And then, later on in the interview about Buffett’s understanding of IBM’s competitive advantage…

[BECKY QUICK] You’ve often said though that you don’t understand technology, so what makes you think you understand IBM’s competitive moat?

[WARREN BUFFETT] Well, I don’t understand it, there’s no question I don’t understand technology as well as I understand the railroad or I understand insurance. But I don’t understand every aspect of insurance, I understand some of the key economic characteristics of insurance and the same way with the railroad. I know a lot of things about parts of the railroad that lead to an economic conclusion. But, there are a lot of things I don’t understand, I mean, and that’s true of industry after industry. We competed, I personally was chairman of the board of a company that competed with IBM for ten years in the 1960’s. And I didn’t understand all of IBM’s business then, but we actually did quite well competing with IBM in the tab-card business… I think I know enough about IBM to make an investment decision. But, whatever, whatever…

[BECKY QUICK] You just said we were competing with them in the tab-card business, that is punchcard, that is not the cloud, this is not the stuff that…

[WARREN BUFFETT] It changes, it changes, and IBM’s changed with it. And it was one time when they didn’t change so well with it, then they made enormous progress under Lou. So it is, the insurance business has changed. We used to sell at GEICO, we used to sell all by direct mail primarily, then it went to phone, then it goes to the Internet, now it goes to the mobile. Companies have to change. But, I think Ginni’s done a great job of fostering change at IBM, but it doesn’t happen overnight.


Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned.

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