His conglomerate, Berkshire Hathaway, reported that it cut its stake in Big Blue by 94percent during the fourth quarter, essentially drawing to a close a rare blemish on his investing record.
The move was disclosed in a regulatory filing on Wednesday that also showed Berkshire increased its investment in Apple, now valued at nearly $28billion (R331bn). And it initiated a new holding in Teva Pharmaceutical Industries, worth about $365m, in the final three months of last year.
IBM was always a curiosity for Buffett followers. He’d spent years telling them that technology companies were outside his area of expertise, then ploughed more than $10bn into the company in 2011.
Back then, Buffett’s investment was a huge vote of confidence for the ageing computer-services firm and its leadership. But things soon went south. IBM struggled with declining sales, forcing Buffett to defend the pick. For a while, he even added some to his holdings. Last year, however, he’d had enough.
Just before Berkshire’s annual meeting in May, he acknowledged that his valuation had been flawed and that he’d begun to cut back on the investment.
Buffett had hinted he might sell additional IBM shares before the end of last year. Since some of the stock traded below his purchase price, it would have been advantageous for Berkshire to recognise a loss when tax rates were higher, he said this January. Berkshire’s stake in the company stood at just 2million shares at the end of December, which have a market value of about $309m.
The episode has highlighted just how badly Buffett missed opportunities in tech companies that have come to dominate the ranks of the world’s most valuable enterprises. At the annual meeting, he issued a mea culpa, saying he “blew it” by failing to invest early in Google, despite having chances to learn about its business model.
In a sign of his new thinking, Buffett ploughed billions of dollars into Apple starting in 2016. He added more to that investment in the fourth quarter, boosting Berkshire’s total stake in the iPhone maker by 23percent to about 165million shares.
While much smaller, Berkshire’s new investment in Teva may capture investor attention. The drug maker has lost more than two-thirds of its value in the past two years. - Bloomberg