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Question of the Day
The shift is important because it has allowed IBM to ride two recessions. When times are tough, businesses pay IBM to help them find ways to cut costs and handle technology chores that would be more expensive to perform in-house.
IBM’s stock has more than doubled since the depth of the recession in 2008. IBM shares gained as much as $2.46 Monday to trade near its 52-week high of $190.53 before slipping to close at $187.35, down 3 cents.
Buffett said Berkshire paid an average of about $170 per share for the IBM stock.
IBM executives insist the company’s focus on long-term contracts insulates it from economic swings. The company has said it is ahead of its own aggressive forecasts. IBM has disclosed a goal of hitting $20 per share in adjusted earnings by 2015, a rare example of a long-term earnings target made public by a major company. IBM, which is based in Armonk, N.Y., says it plans to continue growing its software business and invest about $20 billion in acquisitions from 2011 to 2015.
The third-quarter report filed Monday doesn’t include all of Berkshire’s new IBM stake because Buffett said some of the shares were bought in the fourth quarter.
A couple of the other new investments revealed Monday are tech companies. At the end of September, Berkshire held 9.3 million Intel shares, 4.2 million DirecTV shares, 3.1 million General Dynamics shares and 5.7 million CVS Caremark shares.
But those other new investments, besides IBM, were worth less than $200 million at the end of September. That dollar figure suggests those investments were made by Berkshire’s new investment manager Todd Combs, who manages between $1 billion and $3 billion.
It’s not clear who picked the investments because the filing doesn’t differentiate between investments Berkshire makes, investments any of roughly 80 subsidiaries make, or investments made by Buffett himself.
Besides the new investments, Berkshire also reported changes in some of its other holdings, including:
_ Increasing its sizeable stake in Wells Fargo to 361.4 million shares from 352.3 million in June.
_ Reducing its holdings of Kraft Foods to 89.7 million shares from 99.5 million.
_ Boosting its Dollar General stake to 4.5 million shares from 1.5 million.
_ Increasing its stake in insurer Torchmark Corp. to 4.2 million shares from 2.8 million.
Berkshire’s investments are closely watched in the market because of Buffett’s successful record. Buffett has said that Berkshire has been buying aggressively during the recent market turmoil.
Berkshire occasionally receives permission from the SEC to delay disclosing some stock purchases to prevent others from driving up the price of those stocks before Berkshire completes its purchases. Berkshire then discloses the purchases or sales in a subsequent quarter and issues amended reports for previous quarters.
By Michael P. Orsi
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