Warren Buffet’s Berkshire Hathaway announced on Friday that it has lost $2 billion on its IBM investment. That’s 15% of the over $13 billion worth of IBM’s stock that Berkshire has bought over the past four-plus years.
However, Warren Buffet is keeping the faith. In a regulatory filing, Berkshire states that it is still dedicated to IBM, saying that the downturn in IBM’s stock is “temporary.”
Berkshire stated that IBM continues to generate significant cash flows and be profitable. They, at present, have no plans to dispose of their investment in IBM common stock. They predict that the fair value of their investment in IBM common stock will recover and eventually exceed their cost.
Warren Buffet purchased almost as high as an investor could buy IBM. Berkshire started buying the stock in the first quarter of 2011 and bought in all-in later in 2011, when the stock was in a tear.
As IBM’s shares soared in early 2013 to record highs, the bet was looking smart for a while. However, since then, IBM’s stock has lost more than a third of its value.
Warren Buffet is also famous for avoiding investment in technology companies, but his huge stake in IBM makes it one of Berkshire’s top four investments. As shares of IBM have dropped drastically this year, Warren Buffet saw an opportunity to purchase more shares, recently increasing his investment.
However, IBM is showing barely any signs of a quick turnaround. The company has not done well with the industry’s swift transition to cloud, and is playing catchup to Microsoft and Amazon. The cloud business is doing well, however hardware sales are a tailspin, and IBM recently reported its 14th consecutive quarter of sales decreases.
However, Warren Buffet has sworn that IBM is not a short term investment. He stated over four years ago when he began purchasing IBM that he was in it for the long term.