It is always better to know reasons why great investors are buying particular investment. It is much important to know than what they are buying. Former is like learning to fish while latter is getting fish for a day.
Below is explanation from Warren Buffet on IBM shares buying. It was interview to CNBC.
BUFFETT TO CNBC: “I look at everything but most things I decide I can't figure out their future. IBM helps IT departments do their job better. We've got dozens and dozens of IT departments at Berkshire. I don't know how they run. I mean, but we went around and asked them and you find out that they very much get working hand in glove with suppliers. And that doesn't mean things won't change but it does mean that there's a lot of continuity to it. And then I think as you go around the world, IBM, in the most recent quarter, reported double-digit gains in 40 countries. Now, I would imagine if you're in some country around the world and you're developing your IT department, you're probably going to feel more comfortable with IBM than with many companies. - Warrent Buffett to CNBS (on IBM)
I said I competed with IBM 50 years ago. I was chairman of the board, believe it or not, of a tech company one time, and computers used to use zillions of tab cards and IBM in 1956 or '7 signed a consent decree and they had to get rid of half the capacity. So two friends of mine, one was a lawyer and one was an insurance agent, read the newspaper and they went into the tab card business and I went in with them. And we did a terrific job and built a nice little company. But every time we went into a place to sell them our tab cards at a lower price and with better delivery than IBM, the purchasing agent would say, nobody's ever gotten fired from buying—by buying from IBM. I mean, we probably heard that about a thousand times. That's not as strong now, but I imagine as you go around the world that there are—there's a fair amount of presumption in many places that if you're with IBM, that you stick with them, and that if you haven't been with anybody, you're developing things, that you certainly give them a fair shot at the business. And I think they've done a terrific job of developing that. And if you read their reports—if you read what they wrote five years ago they were going to do and the next five years, they've done it, you know, and now they tell you what they're going to do in the next five years, and as I say, they have this terrific reverence for the shareholder, which I think is very, very important. And I want to give full credit to Lou Gerstner because when he came in, I was a friend of Tom Murphy's and Jim Burke's, and they were on the search committee to find a solution when IBM was almost broke in 1992, and everybody thought they were going pretty far afield when they went to Lou Gerstner. - Warrent Buffett to CNBS (on IBM)
Well, you don't have to think of another one, Joe. And if you read his book, you know, "Who Said Elephants Can't Dance?" it's a great management book. Like I said, I read it twice. There were lots of things in that annual report but the truth is, there were probably lots of things in the report a year earlier or two years earlier that you say, why didn't I spot it then? And I think it was Keynes or somebody that said that the problem is not the new ideas, it's escaping from old ones. And, you know, I've had that many times in my life and I plead guilty to it. I will tell you one very smart thing that Thomas Watson Sr. said. I knew Thomas Watson Jr. just a little bit. Tom Watson Sr., this applies to stocks. He said, "I'm no genius but I'm smart in spots and I stay around those spots." And that's terrific advice. "I don't know of any large company that really has been as specific on what they intend to do and how they intend to do it as IBM," Buffett told CNBC in an interview. Buffett said he was convinced by IBM's long-term roadmap and by IBM’s entrenched position with major businesses. This “entrenched position with major businesses” is a big part of the durable competitive advantage that he looks for when investing. - Warrent Buffett to CNBS (on IBM)
BUFFETT TO CNBC: “The other thing I would say about IBM, too, is that a few years back, they had 240 million options outstanding. Now they probably are down to about 30 million. They treat their stock with reverence which I find is unusual among big companies. Or they really are thinking about the shareholder.” - Warrent Buffett to CNBS (on IBM)
Recently, IBM’s 5Yr Gross Margin (5-Year Avg.) is approximately 44.0% and its 5Yr Net Profit Margin (5-Year Avg.) is approximately 12.3%, while the industry Net Profit Margin (5-Year Avg.) is 11.2%, and the S&P Net Profit Margin (5-Year Avg.) is 11.5%.
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