Bonds Show Warren Buffett Is Not Alone In His Affection For IBM

Includes: BRK.A, IBM
by: Stephen Rosenman

Warren Buffett loves IBM, buying up more than 5% of the company for Berkshire Hathaway. He's not the only one falling for IBM. The bond market has been showing Big Blue deep affection as well.

Look at the demand for IBM's 100-year-bond, issued in 1996. Investors clearly expect IBM to be humming long after most of us will be gone.

IBM.GY/CUSIP: 459200AP6 maturing 12/01/2096:

Not too many bonds trade at a $50 premium. Investors are willing to pay up for this I.O.U. Still, the bond is callable Imagine the losses should IBM redeem the bond.

I'm with Buffett on this one. The stock is a much better buy than the bond. Long term corporate bonds, even stalwart Big Blue, are overbought. The bond price has risen 30% year to date and should be considered untouchable.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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