Buffett Bets Big on Big Blue

NEW YORK—Warren Buffett’s investment company made a big bet on International Business Machines Corp. (IBM).

Buffett, in an interview with CNBC, announced Monday that his company, Berkshire Hathaway, made a $10.7 billion investment in Armonk, New York-based computing and services giant IBM.

Berkshire has bought a total of 64 million shares since March, Buffett told CNBC, for a total value of $10.7 billion. Buffett’s ownership represents roughly 5.6 percent of IBM’s total outstanding stock. The move was confirmed by a filing with the U.S. Securities and Exchange Commission.

The Omaha, Nebraska-based Berkshire has a lot of cash on hand, and Buffett is tasked with spending it. The legendary investor, nicknamed the “Oracle of Omaha,” focuses on buying businesses with reputable management teams and understandable business plans. In the past, he has avoided investing in the technology and financial sectors, saying that future earnings are hard to predict.

Berkshire owns shares of blue-chip American firms, such as The Coca-Cola Co. Its last major purchase was Burlington Northern Santa Fe Railway, which is a direct bet on U.S. business activity, and Monday, he bet more than $10 billion on one of the most iconic computer technology firms.

Buffett said in the interview that IBM has stable cash flows—a hallmark of Buffett investments—and that he recently realized that IBM is now mainly a service provider and consulting firm for corporations. 

His firm is closely followed by investors around the world due to its track record. Buffett also disclosed Monday that his company has been aggressive in purchasing stakes in companies in recent months, due to the lowered valuations of stocks.