Buffett's Big Play for Tech

NEW YORK (TheStreet) -- Last week, investors learned that Warren Buffett had put a great deal of money to work over the most recent quarter. In a recent article , I pointed out that based on the limited information provided in the available filing, the investor appeared to have been taking steps to expand the reach of his legendary investment portfolio. This proved to be true in a big way.

Billionaire investor Warren Buffett shocked fans this week announcing that, over the course of the three-month period ended Sept. 30, IBM ( IBM) had been one of the companies to receive a Buffett-blessing.

His bet is big. According to his most recent 13f filing, his stake in the technology goliath is valued at over $10 billion, making the firm the second largest Berkshire Hathaway ( BRK.A) holding behind beverage giant Coca-Cola ( KO). Buffett's empire currently controls a 5.5% stake of Big Blue, which many have noted may make Berkshire the company's single largest shareholder.
Warren Buffett

Buffett's company's tech appetite didn't stop there, however. In addition to his massive IBM investment, the Berkshire Hathaway filing also indicated that the firm took steps into in semiconductor giant Intel ( INTC) as well. Over the three-month period, Buffett's firm acquired over 9 million shares of chip maker, bringing the total value of the investment to nearly $200 million.

A smaller investment such as this can likely be attributed to Todd Combs, Buffett's new hire.

>>View Warren Buffett's Portfolio

As many have noted, this pair of moves is notably uncharacteristic for the Nebraska native who, over the course of his illustrious multi-decade career, has consistently avoided the technology sector. Instead, Buffett has opted to build his wealth investing in businesses that many would consider "boring." Though lacking in flashiness, this strategy has paid off; by sticking to names like Coca-Cola and See's Candy, the investor has managed to avoid getting caught up in volatile market fads.

For example, at the start of the new millennium, Buffett's decision to avoid tech helped him successfully weather the collapse of the dot-com bubble.

Given his previous disinterest in tech, it is understandable that many would find Buffett's IBM investment surprising. In comments made regarding his new big ticket purchase, however, the investor has laid out the qualities that initally drew him to the firm.

For one, like other Buffett investments such as Burlington Northern Santa Fe Railroad, he is looking at IBM with a long-term view. In the 100 years since its founding, IBM has survived countless market environments, cementing its place within not only the tech sector, but the broader global business world. Buffett praised the firm for its ability to lay out its plans for the future. In addition, Buffett noted that IBM has enjoyed standout stability compared to other tech household names.

Given the investor's very specific tastes in regards to technology, the best way for individuals to mimic his newest purchases is through shares of IBM and Intel, or through Berkshire Hathaway stock. The iShares Dow Jones Technology Sector Index Fund ( IWY) sets aside over 15% of its portfolio to IBM and Intel. However, the fund's index is also heavily focused on Apple ( AAPL), Google ( GOOG), and other tech names Buffett will likely still express hesitance towards in the future.

With his massive investment in IBM, and interest in Intel, it appears as though Buffett has gotten over some of his technophobia. Do you think that the additional technology bets will be in the investor's future? Feel free to leave a comment in the space below.

Written by Don Dion in Williamstown, Mass.

Readers Also Like:


At the time of publication, Dion Money Management did not own any equities mentioned.

More from Opinion

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?