Warren Buffett Still a Shrewd Investor: Tilson
Warren Buffett's recent investment in IBM proves he's still a shrewd investor, hedge fund manager Whitney Tilson told the "Fast Money" team Monday.
“It's remarkable to see an 81-year-old guy continually expanding his circle of competence,” he said. “He’s putting large chunks of money to work in very nimble and clever ways.”
Warren Buffett revealed his $10.7 billion purchase ofIBM common stock earlier Monday on CNBC.
While Tilson was initially surprised by the move, he said after looking at IBM , it now makes sense.
“It’s a globally diversified business that is called a tech company,” Tilson added, “but it really probably has the lowest level of technology risk you can think of in the tech sector in the sense that only eight percent of their net earning are from hardware. “
Plus, he said, IBM has been an incredibly stable cash-producing business and a solid performer for the past two decades.
Tilson said by investing in IBM, Buffett wasn’t looking for a cheap stock that would double his money quickly.
“Rather, [Buffett’s] putting a huge amount of money to work in something that is going to crank out very nice returns for a long period of time with a high degree of certainty,” he said. “That’s what he’s looking for when he’s absolutely drowning in cash. He’s got $64 billion in cash and bonds earning nothing right now.”
And that is good news for Tilson since Berkshire is his hedge fund's largest position.
“We like it when he’s taking cash earning zero and converts it into a stock generating a 50 percent return on equity, trading at 12 ½ times next year’s earnings,” he said. “We don’t think he’s stealing it, but it’s one more step in terms of adding long-term value to Berkshire.”
While Tilson doesn't think Buffett's recent IBM investment changes Berkshire's intrinsic value very much, he still thinks Berkshire is cheap, safe and has nice growth.
"You can buy one of the greatest collections of businesses run by one of the greatest investors—if not the greatest investor—of all time at a 35 percent discount to intrinsic value," he said.
Got something to to say? Send us an e-mail at email@example.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to firstname.lastname@example.org.
Trader disclosure: On November 14, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL; Najarian is long C; Najarian is long WFC; Najarian is long MS; Najarian is long INTC; Najarian is long YHOO; Najarian is long WFT calls; Najarian is long GE; Najarian is long GRPN; Weiss owns WLP; Weiss owns RIG; Weiss owns UO; Weiss owns MOS; Weiss owns SPY puts; Weiss is short TCK; Weiss owns RIMM; Weiss owns HPQ; Weiss owns WLT; Dicker owns Apache
For Steve Grasso
Stuart Frankel & Co and its partners own CSCO
Stuart Frankel & Co and its partners own CUBA
Stuart Frankel & Co and its partners own GERN
Stuart Frankel & Co and its partners own HPQ
Stuart Frankel & Co and its partners own HSPO
Stuart Frankel & Co and its partners own MET
Stuart Frankel & Co and its partners own MU
Stuart Frankel & Co and its partners own NYX
Stuart Frankel & Co and its partners own PRST
Stuart Frankel & Co and its partners own XRX
For Zach Karabell
Rivertwice has short puts AAPL
For Liz Dunn
CNBC.com with wires.