Warren Buffett's Berkshire Hathaway releases its end-of-Q3 stock portfolio snapshot later today, but during his live appearance on Squawk Box this morning Buffett revealed its big secret: Berkshire has bought $10.7 billion worth of common stock in IBM , or 64 million shares at an average price of $170.
The stock is trading around $189 this morning, giving Berkshire a gain of more than 11 percent.
Most of the IBM buying was done in this year's second and third quarters.
Buffett also revealed he didn't do much selling of stocks in the third quarter.
Buffett's company now owns 5.4 percent of IBM but he doesn't intend to buy any more. "I wouldn't be talking about it if I did." Even so, he could resume buying if IBM's stock price goes down enough and Berkshire has enough money coming in.
Buffett says he started accumulating IBM shares in March with the goal to buy $10 billion worth of stock.
We've noted that Berkshire's 13-F filings for the first and second quarters said that some holdings were being kept confidential, and it appears this is the buying spree Buffett was keeping under wraps. (He doesn't want copycat buyers to drive up the price of a stock he's actively acquiring.)
Buffett says he has not talked to the company or current CEO Sam Palmisano about his purchases, but he thinks IBM has done an "incredible job" executing its long-term strategy, has an excellent "road map" for the future, and "respects" its shareholders by being honest with them and doing big stock buybacks. "They've done all kinds of things right."
He gives a lot of credit to former CEO Lou Gerstner, and wishes he'd bought the stock back when Gerstner was running the company. "It was something I should have spotted years earlier." He decided to start buying this year after reading the company's 2010 annual report.
Buffett typically shies away from technology stocks because he often doesn't "understand" what they do, but told us he'd been "hit between the eyes" by how the company finds and keeps clients. "It's a company that helps IT departments do their job better. It is a big deal for a big company to change auditors, change law firms," or change IT support. "There is a lot of continuity to it."
At first he gave the Squawkers a one-word puzzle: the name "Harold." After several minutes of incorrect guesses, Buffett revealed that "Harold" refers to IBM. The connection: a common nickname for Harold is Hal, HAL 9000 was the name of the computer in the 1968 movie 2001: A Space Odyssey, and it's often been associated in people's minds with IBM. (Wikipedia's entry on HAL notes that while IBM is a one-letter shift forward from HAL, Arthur Clarke has written that the relationship is coincidental and he and director Stanley Kubrick would have changed the name if they had spotted it.)
Buffett also repeatedly urged his questioners to "think" as they were guessing. "Think" was IBM's long-running slogan.
Buffett says he would never buy Microsoft, another computer-related stock, due to his close friendship with Chairman Bill Gates.
Buffett says Berkshire did add to its Wells Fargo position and he thinks Bank of America CEO Brian Moynihan is following a "very logical path" to fix the bank.
Asked if he supports the movement, Buffett said because its goals and leadership are unclear it probably won't change things. He does, however, continue to believe the "super-rich" need to share in the national sacrifice that will be needed to get the federal government's budget deficits under control.
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