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Why Warren Buffett Exited IBM in 2018

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Jan. 8 2019, Published 9:47 a.m. ET

IBM

Berkshire Hathaway (BRK-B) invested in IBM in 2011. In 2018, Warren Buffett exited the company. Over the years, Buffett hasn’t been known for his investments in technology companies (QQQ). He avoided tech companies during the boom in the 1990s. Last year, Buffett also admitted to missing out on Alphabet (GOOG) and Amazon (AMZN). After IBM, Apple (AAPL) was Buffett’s second bet in the tech space. However, Buffett sees Apple as a consumer company and not as a technology company.

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First tech investment

While IBM was Buffett’s maiden tech venture, it didn’t play out like he wanted. Looking at Buffett, technology hasn’t been his circle of competence. One of Buffett’s quotes is “Never invest in a business you cannot understand.”

Although IBM didn’t add to Buffett’s enviable investment record, he still exited it at the right time. The stock lost more than a quarter of its market capitalization last year. IBM lost 7.6% in 2017. While 2018 was a tough year for stock markets, markets were strong in 2017.

From Buffett’s perspective, while investing in IBM was probably a mistake, exiting the stock wasn’t a mistake, which is visible in the stock’s dismal price action. Buffett’s tech investments have received even more scrutiny. Apple stock fell in the fourth quarter.

Next, we’ll see if Apple could be another IBM for Buffett.

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