Market Overview

Patience About To Pay Off For Buffett On His IBM Investment


Warren Buffett's Berkshire Hathaway started buying shares of International Business Machines Corp. (NYSE: IBM) back in 2011 and the trade remains unprofitable.

However, IBM's stock is approaching the average price he paid for IBM at $170.43. At one point, his 8.6 percent stake in "Big Blue" represented a loss of billions of dollars yet the investor remained confident his bet would eventually pay off.

IBM's stock was trading as high as $168.48 on Friday and is higher by nearly 30 percent over the past year.

In an interview with CNBC last year, Buffett argued that the price an investor pays for a stock "doesn't mean anything." He emphasized the fact that what does count is where the company will be in five to 10 years. Specifically, Buffett was attracted to the company's clearly communicated road map and shareholder friendly initiatives including $46.8 billion of share buybacks since the start of 2012 through the end of the third quarter of 2016.

Buffett is demonstrating patience and conviction in his original thesis, even if it goes against him for years.

"I think IBM will be worth more money but, like I said, I could be wrong but we'll accept that," he added in his CNBC interview last year.

Meanwhile, analysts at Morgan Stanley boosted their price target on IBM's stock to $187 from a previous $179 and analysts at Stifel now see IBM's stock trading as high as $192.

If IBM moves as high as analysts are estimating, then Buffett not only vindicates himself but he adds a small fortune to his already vast wealth.

Posted-In: Big Blue CNBC IBM Warren BuffettMovers Media


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