There was a time when Warren Buffett said, “Technology is just something we don’t understand, so we don’t invest in it”. This time was 1998. Fast forward 13 years later, and Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reveals a 5.5 percent stake in International Business Machines (NYSE:IBM), which was expanded according to the last 13f SEC filing of Q2 2012. IBM is not the only tech company that Buffett has owned, one other is Intel Corporation (NASDAQ:INTC), the stake was sold in last quarter.
Whitney Tilson of T2 partners likes to draw an analogy between Warren Buffet and Steve Jobs of Apple Inc (NASDAQ:AAPL). We are more interested in the chances of taking this ‘relationship’ a step further. Is Buffett going to own Apple stock in the near future? Does the company meet Buffett’s high standard, or is it still too far behind and too risky. Till a few months ago, Buffett did not like Apple Inc. (NASDAQ:AAPL), at least not enough to buy it.
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
But what changed for technology stocks, so that BRK started buying them. It is likely that Buffett and Charlie Munger (VC of Berkshire) have expanded their horizons, and now understand how these tech companies work, but what is more plausible is that the attraction lies within the company. Buffett likes solid brands with a defined structure, take the example of The Coca-Cola Company (NYSE:KO) and The Procter & Gamble Company (NYSE:PG). Intel and IBM are not much different in that respect, they don’t act like your everyday tech giants, by relying heavily on a single product. Both companies make products whose demand is likely to sustain over the long run, and is less dependent on ambiguous metrics, like public sentiment and the number of hits. Stocks like Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB) are too intensely invested in public sentiment and reliance on advertising and search engines. Do similar headwinds affect Apple? Not really, Apple Inc. (NASDAQ:AAPL) has a line of strong products. It has iPhone, iPad, iPod, and Macs. The recent showdown of Apple vs Samsung has made it evident that the supremacy of Apple, whether in its iOS or design, is undefeated.
When Buffett talks about his favorites, like The Coca-Cola Company (NYSE:KO), he says things like, “If you gave me $100 billion and said, ‘Take away the soft-drink leadership of Coca-Cola in the world,’ I’d give it back to you and say it can’t be done.” Drawing on the same argument, Apple, which is the largest company by market cap, has no competition that it has not managed to defeat yet. Buffett would probably agree that Steve Jobs’ empire has flourished by far more than anyone imagined, even after his demise, and is quite singular in its stardom.
Berkshire is profitable and Buffett has the extra cash , plus Apple Inc. (NASDAQ:AAPL) is not exactly an expensive buy, and the dividend yield is an added plus. Among all these good signs, what is stopping Buffett from buying it? Buffett already owns two of the top three global brands, KO and IBM, Apple holds the second spot, and Buffett likes a well-branded company. But brand perception is not everything. We just witnessed how Apple Inc. (NASDAQ:AAPL) went above 700 and then dove below 670 in a matter of days. The company is still too vulnerable and hits lows and highs frequently, and we know when Buffett owns a stock, he likes to stick to it indefinitely, “Our favorite holding period,” says Buffett, “is forever.” So no Apple Inc. (NASDAQ:AAPL) for Buffett anytime soon.