Warren Buffett needs to go on the record and reaffirm his confidence in International Business Machines Corp. (NYSE:IBM) in order for investors to believe that the company is indeed still a good stock to buy, Jim Cramer said in a discussion on CNBC.
The comment about Big Blue came from Cramer after Warren Buffett saw over $1 billion in value wiped out from Berkshire Hathaway’s investment on the Silicon Valley veteran on Monday after a significant decline in the company’ stock price triggered by a disappointing third quarter performance.
“I think that as long as Warren Buffett came on Squawk Box and said that he’s still happy with IBM and the buyback, there are a lot of people who just said, ‘You know what, this is one that’s a little more like Coca-Cola than we thought [and] a little more like Wells Fargo than we thought. There’s a lot of business here and it’s a temporary shortfall.’” Cramer said when prompted about how important Warren Buffett is to the thesis at IBM.
In 2011, Berkshire Hathaway announced a massive investment in International Business Machines Corp. (NYSE:IBM). The investment firm bought a 5.5% stake in the technology company which was then valued at $10.7 billion. Later on, Buffett upped his stake in IBM to over 7%.
According to Cramer, Warren Buffett said in the past that the investment in International Business Machines Corp. (NYSE:IBM) will pay off because of the company’s buyback program. However, the CNBC host also noted that there is a significant slowdown in the company’s buyback activities.International Business Machines Corp. (NYSE:IBM) reported a revenue of $22.4 billion for the quarter ending on September, a 4% decline compared to the year-ago quarter. Profit was reported to be $3.5 billion, a 17% slip from the same quarter a year ago. Earnings per share was reported to be at $3.46, a decline of 8%.
Furthermore, the company announced that it will take on a separate $4.7 billion pre-tax charge in connection to its deal for GlobalFoundries to acquire its chipmaking business. These contributed to the pre-market trading slip for the technology giant.
Buffett, often called the Oracle of Omaha for his uncanny ability to make winning investments, recently admitted that his investment in UK supermarket chain Tesco is a “huge mistake”.
Warren Buffett’s Berkshire Hathaway is the largest institutional investor in International Business Machines Corp. (NYSE:IBM) with about 70.17 million shares in the company by June 30. That stake, at the time the firm reported it to the Securities and Exchange Commission, was worth about $12.72 billion and made up a massive 11.82% of its whole portfolio. Buffett is known to rarely invest in the technology sector. Buffett’s biggest position in his portfolio is Wells Fargo which is one of the biggest banks in the World.