Warren Buffett's 6 New Investments

NEW YORK (TheStreet) -- Warren Buffett revealed earlier today that he spent more than $10 billion for a stake in software-services company IBM (IBM), his first investment in a technology company. And now a regulatory filing shows he made another bet on tech: chipmaker Intel (INTC).

IBM is Berkshire Hathaway's ( BRK.A) second-largest holding, pushing Wells Fargo ( WFC) to the No. 3 spot. Coca-Cola ( KO) is his conglomerate's biggest investment.
Warren Buffett

The billionaire investor's portfolio held only 33 stocks as of Sept. 30. Buffett started buying IBM shares in March and accumulated 24.9 million shares in the second quarter before adding 32.5 million shares in the third quarter and an undisclosed amount in the current quarter.

Buffett had avoided investing in technology companies because he said they're difficult businesses to predict. Trends come and go, and he prefers longstanding companies such Fruit of the Loom underwear and See's Candies. But IBM, founded in 1911, is as ingrained in the world of technology as railroads are in commodities transportation and machinery companies are in manufacturing.

Buffett's entry into IBM is based on the company's service offerings, which are more predictable and conducive to his value-investing strategy. But Intel is a different animal. It's more likely a play on dominant brands backed by strong customer loyalty. Those brands stand to gain market share in a world that's becoming more driven by technology every day.

>>View Warren Buffett's Portfolio

Buffett doesn't always publish his holdings in so-called 13-F filings. If he's building a stake in a company, he uses a loophole to opt out of disclosure regulations. But once his holdings are released publicly, people tend to follow him, pushing up share prices.

Based on the third quarter 13-F filing, released today, Buffett added to positions in Wells Fargo and Dollar General ( DG). He cut his investments in Kraft Foods ( KFT), Johnson & Johnson ( JNJ) and ConocoPhillips ( COP).

Overall, Buffett added six new investments last quarter. The following pages detail those, including IBM.


6. IBM ( IBM)

Company Profile: IBM offers technology and business services in addition to developing operating system software.

Buffett's Investment: The hedge fund bought 32.5 million shares of IBM during the third quarter, bringing his total investment to 57.4 million shares valued at $10 billion as of Sept. 30. Subsequent to the third quarter, Buffett bought more shares for a total of 64 million worth $10.7 billion.

Share Price Performance: Since the end of March, when Buffett began buying, the stock is up 15%. The stock reached a new 52-week high Oct. 14. At an average purchase price of $170, Buffett probably took advantage of a dip in mid-August when Moody's downgraded U.S. debt.

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5. Intel ( INTC)

Company Profile: Intel makes computer chips.

Buffett's Investment: Buffett initiated a position in the chipmaker with the purchase of 9.3 million shares during the third quarter, which had a value of $199 million as of Sept. 30.

Share Price Performance: Intel is up 4% this year. During the third quarter, the stock declined by 4%, but between June 30 and today, the stock has risen 11%. If Buffett waited until the stock pulled back to below $20 in August, he may have realized an even better return.


4. Visa ( V)

Company Profile: Visa is a global payments processor.

Buffett's Investment: Buffett initiated a position in Visa of 2.3 million shares during the third quarter. As of Sept. 30, those shares had a value of $196 million and represented less than half of a percent of Buffett's holdings.

Share Price Performance: During the third quarter, the stock increased by 2%, but between June 30 and today, it's up 11%.

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3. CVS Caremark ( CVS)

Company Profile: CVS is an operator of retail pharmacies across the country and provides health-care services through its pharmacy-benefits manager (PBM) division.

Buffett's Investment: Buffett initiated a position in CVS in the third quarter with 5.7 million shares. As of Sept. 30, those shares were worth $190 million, representing less than half of a percentage point of his portfolio.

Share Price Performance: During the third quarter, the stock declined 11%, but between June 30 and today, it's up 3%. CVS has been criticized since it merged with Caremark in 2007 to combine CVS's retail business with Caremark's PBM business because they were thought to have an unfair advantage given the combination. The stock isn't a substantial holding for Buffett, making it seem as if he believes in the combined platform and isn't going to push for a breakup of the merged company.


2. DirecTV ( DTV)

Company Profile: DirecTV provides digital TV in the U.S. and Latin America.

Buffett's Investment: Buffett initiated a position in DirecTV in the third quarter with 4.3 million shares. As of Sept. 30, those shares were worth $180 million.

Share Price Performance: During the third quarter, the stock declined 17%. It rebounded from an early October low, but is still down 10% since the start of the quarter.

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1. General Dynamics ( GD)

Company Profile: General Dynamics is a defense-industry contractor.

Buffett's Investment: Buffett initiated a position in General Dynamics in the most recent quarter through the purchase of 3.1 million shares. As of Sept. 30, the stake was worth $174 million.

Share Price Performance: During the third quarter, the stock fell 24%, the worst performer of all of Buffett's new investments. Like his other new investments and the broader market, General Dynamics' shares began to rebound in October and, as of today, are down only 12% since the end of June.

>>To see these stocks in action, visit the Warren Buffett's 6 New Investments portfolio on Stockpickr.

-- Written by Lindsey Bell in New York.

>To contact the writer of this article, click here: Lindsey Bell.

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