Warren Buffett and Berkshire Hathaway have a big stake in tech giant International Business Machines. But could Apple be more of a traditional Buffett pick than IBM? Validea CEO John Reese says his Buffett-inspired “Guru Strategy” indicates that that appears to be the case.

“Following Apple’s fiscal fourth-quarter earnings announcement in mid-October, my Buffett-based [quantitative] model upgraded the stock to a very strong 93-per-cent score, eclipsing IBM’s still-solid 75-per-cent score,” Reese writes in a recent column for Canada’s Globe and Mail. “While Mr. Buffett certainly looks at non-quantitative factors when assessing a stock, in the end his approach comes down to the numbers on a company’s balance sheet and in its fundamentals. And on that basis Apple comes out ahead of IBM.”

One example: “Mr. Buffett likes conservatively financed companies, and my Buffett model calls for companies to have enough annual earnings that they could, if need be, use those earnings to pay off their debt within five years (and preferably two),” says Reese. “With about $33-billion (U.S.) in debt and $16-billion in annual earnings, IBM makes the grade. But with $29-billion in debt and $38-billion in annual earnings, Apple looks even better.”

Reese examines other reasons Apple comes out on top — including one that involves the quality of IBM’s earnings. To read the full article, click here.