Shallow "HAL": Buffett Buys Big Blue

This morning, Warren Buffett showed that he is the second coming of "Shallow Hal," after

a 5.5% stake in IBM

, worth over $10 billion. The reference to "HAL" is the clue that Buffett gave to CNBC this morning. I,B,M are the letters after H-A-L in the alphabet, and is a reference to the classic movie, "2001: A Space Odyssey." Buffett disclosed that he bought the stake in the last quarter, and it will show up in his 13F, which is going to be released later today. Buffett said that he paid an average of $170 per share on his stake, meaning that he is up approximately 11% from his average purchase price to the announcement this morning. Shares initially popped $2 on the announcement, but have since come well off those levels, as traders fade the "Buffett buy." The CEO of Berkshire Hathaway (NYSE:

) is renowned for his investing acumen, but he has never invested in technology names. Buffett has previously said that he does not understand investing in technology companies, and that was the primary reason he did not invest in the space. IBM has transformed itself directly from a technology and hardware company into a global $222 billion service, software, and consulting mega-cap. Buffett is the world's most well respected value investor, so picking up IBM at $170 per share means he saw value, even with the shares up 17% year to date at that time. Shares are now up almost 29% year to date, and despite their strong returns to date, the company trades at just 12.6 times expected 2012 earnings. Shares also sport a 1.6% dividend yield. Buffett

that he will never buy Microsoft

not because of his affront to tech, but rather his relationship with Bill Gates. The saying goes "You can't teach an old dog new tricks." Buffett, 80, is anything but young, but for him to plunge into the tech waters (nearly $11 billion is not just dipping your toe in) is definitely a new trick.

Traders who believe that Buffett will continue buying tech like IBM might want to consider the following trades:

Traders who believe that Buffett will not increase his stake in IBM anymore may consider alternate positions: