Warren Buffett declared his $10.7 billion claim into IBM today, the first tech fund Buffett has invested in his portfolio and nearly 5% of the company. According to John Buckingham, manager of Al Frank Fund as well as editor of the Prudent Speculator, “It’s a quality company and we think it will grow faster than the overall market. They have tremendous global presence … and can take market share from competitors, and so far they’ve been exceeding all their financial mileposts.” While it seems appropriate to finally include some sort of tech firm in your portfolio, one question still remains: why buy the shares at such a high, premium rate?
Perhaps Mr. Buckingham described this the best: essentially, it’s going to outpace the rest of the competition, despite of the economic conditions. This still leaves some worrying issues though. For one, they really should have timed this investment better: currently, IBM has been setting all-time highs frequently for the past two years. While this may be great news, it spells something else out to me: that they are either ready to start steadying out or could witness a tumble. Both would be terrible outcomes for Mr. Buffett.
Furthermore, this action steps outside of a logic and a realm that Buffett has always stood by. Displaying a more “concentrationist” approach, his choices in investments have always reflected areas that he felt comfortable and knowledgeable in, such as finance and non-durable goods. Tech firms are far from those two realms. With all said and done, however, I do believe it was a good decision to begin getting acclimated into tech funds: they are, after all, an industry to large to simply ignore. As for timing, the timing could’ve certainly used some work.