15-11-2011, 08:15 AM
Quote:By early March, when he started buying the stock, the shares had risen more than 25 per cent from their most recent low of six months previously. Even the stock's lowest point during the third quarter, when Mr Buffett built the rest of his stake, was one of its highest levels ever.
If you look purely at the stock chart, the price point at which guru Buffett entered does not look like the act of a typical value investor. He bought near an all-time high (not just a 52-week high or multi-year high but an all-time high). On the growth side, IBM looks reasonably good for a huge company with a 3-year EPS growth rate of 15%. Like Buffett said, value and growth are joined at the hip. But to buy it at an all-time high? Buffett certainly must have good reasons to do so. I am just surprised that a person who shuns technology all his life can have the knowledge and confidence to buy a giant, complex tech stock at an all-time high. At an all-time high, the margin of safety is little. Buffett is placing his bet based on what he sees in the future, something which only industry veterans can do with better odds. I cannot help but respect this fellow.
As a short-term play this year, IBM did very well relative to the market. As of last night, the gain so far this year is 29%. Not bad for someone who claims to ignore market fluctuations and eschews market timing.