There’s a really insightful article in the FT regarding ‘Sage of Omaha’ Warren Buffet’s investment in IBM. Buffet’s Berkshire Hathaway has taken a 5+% slice of IBM’s stock, worth some $11b at current market valuation.
The FT article alludes to Buffet’s aversion to tech stocks due to their ‘unpredictability’, and includes a prescient comment from Bill Gates when they met back in 1998: “I think the multiples of technology stocks should be quite a bit lower than the multiples of stocks like Coke and Gillette, because we are subject to complete changes in the rules. I know very well that in the next 10 years, if Microsoft is still a leader, we will have had to weather at least three crises”.
An accompanying FT article poses the question, “Does Warren Buffett buy a stock because it’s a good investment, or is it a good investment because Warren Buffett buys it?”. We can’t read minds and neither can we take a view on stock performance. Having said that, IBM is not quite the archetypical ‘boring’ company – EPS took a dip in 2002 but has increased every year since – but perhaps Buffet’s endorsement makes it thus!