Is Buffett’s investment in IBM struggling? Will the company see trouble on the horizon? As of the time of this writing, Berkshire Hathaway, Warren Buffett’s investment company, owns 68.1 million shares of International Business Machines.
What you might not realize is IBM dropped 8.3% last Friday, and the total share price is now $190. What’s the reason for the decline? The company reported earnings last Friday and first-quarter sales were lower than expected.
What’s the total damage to Warren Buffett? Well, the 8.3% drop in value cost him $1.168 billion. The shares are currently worth $12.94 billion. But in reality, Berkshire Hathaway does not have to sell their shares, so it’s not a realized loss until they do so.
Most analysts know that Warren Buffett will buy and hold this stock for many years. So it’s highly unlikely that Berkshire will end up eating this total loss. When looking at Buffett shares from an estimated cost basis, he roughly paid $173 per share. So he is still ahead of the game, even though he just gave away a big chunk of his returns.
The trading volume picked up heavily last Friday. The average trading volume is 4.1 7 million shares, but last Friday 18.85 million shares traded. The stock fell 8.28% and it rose 0.13% in premarket trading.
IBM’s price to sales ratio over the last 12 months is 2.04. The price to cash ratio is 17.59. The return on equity is 83.28% and the company’s return on assets is 14.25%. IBM’s ROI is 21.79%.