Warren Buffett’s Berkshire Hathaway Ups Stake in IBM and GM, Cuts Walmart
Warren Buffett isn’t backing away from his big bet on IBM. In fact, he took advantage of the market’s autumn swoon to increase his stake in the tech giant. Buffett’s Berkshire Hathaway also upped its stock in General Motors in the third quarter as well.
Berkshire Hathaway, which is Buffett’s insurance and investment conglomerate, added 1.5 million shares in the third quarter to its stake in IBM (IBM), according to a filing released on Monday morning. The newly added shares only increase Berkshire’s position in the company by 2%, but the increase is notable because IBM is already one of its largest positions, and one of its most embattled. Some have questioned the wisdom of Berkshire’s investment in IBM, which has struggled in its transition to computer analytics and cloud computing and has seen its shares slide nearly 18% this year.
Just the same, Buffett reiterated his confidence in the company. Earlier this month, in Berkshire’s third quarter financial filings, the company said that IBM continued to be profitable and produced significant cash flow. “We expect the fair value of our investment in IBM will recover and ultimately exceed the cost,” wrote Berkshire.
At the end of the third quarter, Berkshire held just over 81 million shares in IBM, which was worth $11.75 billion at the time. IBM’s shares have slipped since then and the value of Berkshire’s holding has fallen to $10.6 billion.
Along with IBM, Berkshire upped its stake in General Motors (GM) in the third quarter. Berkshire added nine million shares to its holding in GM, which reached 50 million shares at the end of the third quarter. That stake is now worth around $1.7 billion. Shares of the car company are down about 2% this year. Berkshire’s investment in GM is widely believed to be driven by one of Buffett’s investment lieutenants, Ted Weschler. Weschler and partner Todd Combs have taken over more responsibility of Berkshire’s portfolio from Buffett, and they are believed to be responsible for many of Berkshire’s smaller holdings.
A number of Berkshire’s largest holdings have suffered recently, leading some to question whether Berkshire’s portfolio is stuck in a number of lumbering giants. Berkshire holds five large investment positions, which make up about 60% of its portfolio. The others are American Express, Coca-Cola, Walmart, and Wells Fargo.
Walmart (WMT) recently cut its earnings outlook for the next two years. But unlike IBM, Buffett cut his stake in the retail behemoth by 7% in the third quarter. Berkshire also sold nearly 1.7 million shares of Goldman Sachs (GS) in the quarter, cutting its stake by 13% in the bank. Berkshire also completely exited its position in Viacom (VIA) during that time, selling all of its nearly 6 million shares in the company. But Berkshire added to other media investments, including 21st Century Fox (FOX) and cable company Liberty Media (LCMA). Combs is likely responsible for many of Berkshire’s media investments.
Berkshire’s position in Coca-Cola (KO) remained unchanged in the quarter. Shares of the beverage giant are down slightly this year. Hedge fund manager Bill Ackman recently called Berkshire’s investment in the company immoral, saying the company’s products significantly add to nation’s problems with obesity. Ackman’s comment came at an event to commemorate Buffett’s 50 years running Berkshire. And they were part of a war of words between Ackman and Berkshire. Recently, Buffett’s long-time investment partner Charlie Munger had called drug company Valeant, which is one of Ackman’s largest holdings, and its practice of significantly increasing drug prices “deeply immoral.” Coke called Ackman’s comments on obesity “irresponsible.”