(Adds details on Apple and Google.)
Buffett, through his investment company, Berkshire Hathaway (BRK.B), began building a position in IBM in March and continued to buy the stock through the third quarter, he said on CNBC. He paid, on average, $170 a share for a 5.5% stake worth about $10.7 billion. IBM has risen 28% so far this year, more than Apple's 19% increase and Google's 2.4% gain.
The investment in IBM, Buffett's first purchase of a technology company, has been left out of recent filings by Berkshire. Investors tend to mimic Buffett's investments given his solid track record, which quickly drives up prices of the stocks he buys. IBM shares are up about 1% today. Buffett has avoided investing in technology companies in the past because he says they're difficult businesses to predict. IBM, however, has done a great job of transitioning itself focus on the more profitable software and services businesses, which now represent about 75% of sales, making it less of a technology company than it was in the past. Buffett's involvement in IBM is a strong endorsement. Stephanie Link, co-portfolio manager of Jim Cramer's Charitable Trust Portfolio, says IBM's dominant franchise, stellar cash flow/balance sheet, big returns and solid management make the company attractive for a value investor like Buffett. In fact, the company's outlined a goal to generate $100 billion in free cash flow from 2011 to 2015. Apple is considered by many to be a premier consumer-products company, an industry Buffett has invested in heavily. But its rapid growth and trendy reputation make it less desirable for Buffett. The company even flirted with bankruptcy in the 1990s. >>View Warren Buffett's Portfolio Google appears to be more palatable to Buffett. The search-engine company is expected to increase earnings per share in the next few years at just under 20% and is trading at a multiple of 14, which is considered low by investors. However, Google is focused on technology and advertising, and doesn't have a steady services business that dominates its earnings. Also it isn't considered a dyed-in-the-wool American company that has stood the test of time like Buffett's second-largest holding, Coca-Cola (KO). Buffett also noted in the CNBC interview that he added to his position in Wells Fargo (WFC). Berkshire Hathaway is expected to release a 13-F filing today that will disclose Buffett's investments through the end of the third quarter.
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