Shares of IBM Down after Warren Buffett Reveals That He Has Sold 1/3rd of Berkshire Hathaway's Stake in the Company

Over the past number of years, Warren Buffett's continued support of IBM has baffled many market watchers.

What did the "Oracle of Omaha" see in the company, they wondered? Was he seeing some hidden value in the company that other people couldn't spot?

Earlier today, Buffett revealed that he recently cut Berkshire Hathaway's stake in the company by 1/3rd. Berkshire Hathaway once owned 81 million shares of IBM, though that stake has now been cut down to 50 million shares. This is obviously still a very big holding, though it has been significantly pared down in recent months. Buffett revealed that he started selling shares when IBM traded past $180/share recently - this was a very good exit point, as IBM has since slumped to a current level of $155.

Most worrying for IBM's shareholders was Buffett's less-than-complimentary words about the company:

"I don't value IBM the same way that I did six years ago when I started buying. I think if you look back at what they were projecting and how they thought the business would develop, I would say that they've run into some pretty tough competitors."

On the other hand, however, Buffett said that he could decide to buy more shares of IBM in the future, if they fall to a low enough price.

There is no doubt that IBM has been the beneficiary of a "Buffett Premium" over the past number of years, and some of that premium has melted away today.

There is also no doubt that IBM is going against some very tough competition right now, which includes the likes of Microsoft, Google and Amazon.com. Detractors of the company say that the company isn't doing very well, and that they are engaging in financial engineering to propel their stock price higher.

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The fact of the matter is that IBM's shares haven't done very well since Buffett first starting buying them six years ago, and he wisely used the recent run-up in shares to lighten up on Berkshire Hathaway's position in the company.

By selling 1/3rd of Berkshire Hathaway's stake in IBM, Warren Buffett now has even more cash (totalling roughly $90 billion) with which to potentially purchase another very large company. Speculation has turned as to the potential identity of that company, though Buffett has said that finding value in this market if difficult given low interest rates.

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