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Druckenmiller, Buffett At Odds On International Business Machines Corp. (IBM): What Do Hedge Funds Think? Plus Druckenmiller’s Top New Picks

Duquesne Capital’s Stanley Druckenmiller respects Warren Buffett’s opinion on International Business Machines Corp. (NYSE:IBM); he just doesn’t agree with it. In an interview with CNBC yesterday, Druckenmiller offered his take on the staunch viewpoint Buffett has taken concerning IBM, in which he has said IBM is doing exactly what he expects, and that the company’s share buyback program is a good thing.


“Mr. Buffett and I have a different opinion on International Business Machines Corp. (NYSE:IBM). I certainly respect his opinion, but I have my own. My guess is looking at the situation; he thinks IBM’s problem is cyclical. I think it is secular and if you think a company has a secular problem, particularly with sales being lower than where they were six years ago when the economy was much worse, the last thing they should be doing is buying back stock,” Druckenmiller said.

Buffett increased his position in International Business Machines Corp. (NYSE:IBM), one of his “Big 4” holdings during the fourth quarter to 76.97 million shares, up 10% from the 70.48 million he held at the end of the third quarter. While IBM had a strong run coming out of the 2008 financial crisis, gaining nearly 150% from late 2008 to early 2012, shares are down nearly 25% since and 13.31% in 2014, as PC sales have stagnated in the face of the growing popularity of mobile computing, leading to revenue declines for 11 straight quarters.

Hedge funds seem to be lukewarm on International Business Machines Corp. (NYSE:IBM) in relation to Buffett, and considering the reduced barrier of entry. While fund ownership increased to 58 from 56, in terms of percentage of fund ownership, it actually declined to 7.9% from 8.2%, as we added dozens of additional funds to our database during the past quarter. Invested capital also decreased to $14.50 billion (of which 86% of that capital was Buffett’s), down from $15.43 billion at the end of the third quarter.

Capital did show a slight uptick however if we disregard the fluctuation in the stock, which declined over 15% during the fourth quarter, while invested capital declined only 6%. Again however, this can largely be attributed to Buffett’s own moves on the stock during the quarter, as he added about $1.04 billion worth of stock to his portfolio. Without his contribution, invested capital declined by about 12.7%, only slightly less than the decline in shares, showing only a modest increase in capital from other hedge funds.

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