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JohnCLeven (29.89)

October 2014



Regarding IBM

October 20, 2014 – Comments (8) | RELATED TICKERS: IBM

Selling divisions? Buybacks? Controversy?

Boy, oh boy, IBM is taking a beating.

Earnings misses, financial “engineering”, and of course PAYING someone to take a business off your hands...WOW. Talk about a train wreck. (No BNSF pun intended)

Those geezers Buffett AND Munger (see below) have clearly made a HUGE “unforced error” with IBM, one their largest equity investments of all time. 

"I was perfectly OK with it. It's a very Buffett-style play. It's simple. They announced what they were going to do and why they thought it was going to work. You could see how entrenched IBM was in many places, including the Burlington railroad. I think our business experience helps our investment judgment, and vice-versa. ... We've always said that what we like best was owning a wonderful business outright, and second best we like good ideas in securities. That has never changed." – Charlie Munger

Buffett’s and Munger’s dementia is clearly starting to show. After all, they’re violating their own rule about not investing in tech companies.
I mean, come on, Buffett was recently spotted singing Frank Sinatra to 400 women.

Clearly, the man needs to retire, reinstate a proper dividend, and break Berkshire up into smaller parts to “unlock value”, right? 

OR wait…perhaps there’s another possibility?

Maybe, just maybe, the old man and his partner are going to go out with one last big victory for the shareholders.

Maybe, after 50 years of reading IBM annual reports, Buffett sees something that the masses have missed?

Maybe, Buffett happened to notice IBM taking a page from the book of Bill Anders, former General Dynamics CEO. GD sold off/exited unprofitable businesses, and bought back a ton of shares. Berkshire owned GD, and did quite well on that investment, if my memory serves.

General Dynamics was thought to be crazy, selling off this business, and that business. They were “manipulating” their earnings by buying back huge blocks of shares. Surely that can’t be considered “real” growth, can it?

Maybe, Buffett made a GOOD buy betting $10 billion on IBM at 15x earnings in 2011 @$175ish, and now you can make a FANTASTIC bet today buying IBM at 11.3x earnings in 2014 @ $169ish three years after Buffett, and make an absolute killing.

Maybe, the wisdom of the masses is wrong…again...and Buffett spent the day skipping around Kiewit Plaza happily buying MILLIONS of IBM shares. 

Maybe, just maybe, NOW is the time to be greedy when others are fearful?  [more]

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