IBM Common Stock (IBM)

This has struggled in terms of growing their top line. Warren Buffett had a big position and has since trimmed it. This might have been a bit of an ROE trap. They might have been slow to adjust to the new technological landscape. It has gone basically nowhere over the last 10 years. There are a lot better opportunities in the Tech space.

IBM (IBM-N) or Microsoft (MSFT-Q)? Doesn't own either, but of the 2, Microsoft is the safer name to own. They are much deeper into their turnaround. The theme with Microsoft has been Cloud, Cloud, Cloud.

She has not held this name, because it got so large it couldn't really grow its top line anymore. They managed to grow the bottom line by buying back stock. There is not a lot of growth in this. They’re trying to change that through acquisitions, and that will take some time. You typically buy technology stocks for growth, and she feels there are more attractive growth companies than this one.

This has a monopoly position with a story similar to Microsoft. The only difference is that this one is effectively what Microsoft is ultimately going to become, i.e., they buy back shares about 2%-3% per year and have done that for about 15 years. Have raised the dividend every year. A total return story, capital appreciation plus the dividend. At the moment it is fairly inexpensive and is actually on sale. If you have a multiyear time horizon, its an interesting way to play tech. Very, very strong balance sheet.

(Market Call Minute.) This company is tying their wagon to artificial intelligence. The stock has come off its lows of August, and the jury is still out. He would be a "solid neutral" on this.

An old tech company that is undergoing a significant transition. Ultimately, they are going to be successful. It may take another year or so of flattish earnings, but after that they are really going to hit their stride with their software and services offering. Shares are very cheap, trading at 11X earnings.

Artificial Intelligence is something that almost everybody is interested in. This company is in that business. They made their bones as the first big hardware company when mainframes were the thing. Also invented the PC. In recent years, this has become a software company, almost like a utility in terms of managing existing infrastructure.

In Q1 there was a lot of positive momentum behind the stock. However, the bloom has now come off that rose a little. Technically it has broken down. You have to climb through a couple of major resistance levels if you want to reclaim and then ultimately set higher highs. Kind of a single digit grower and ultimately, they have a pretty tough row. He would prefer something else.

This is in the penalty box. The problem is with having their AI and Watson on one side, and all the old hardware and systems on the other side. You have legacy assets that are not growing, and you have growth coming out of the other. Revenues for the last quarter were down 3% at constant currency. Growth profit margins are down year-over-year. Cloud is going to be a commoditized market, because you have Amazon (AMZN-Q), Salesforce (CRM-N) and Microsoft (MSFT-Q) in that area. It is really going to come down to Watson and how quickly they can write that Artificial Intelligence algorithm scalable to get market share and keep it. It could go sideways for a while and you’ll pick up yield, but hope that new services can grow faster than legacy assets is declining.

He would be a buyer here. Negativity is so great that a lot of it has impacted the price. He is still seeing strong cash flows and good earnings. You are only paying 11X earnings. They are migrating from old tech into new tech of Cloud. There is pretty good risk/reward.

*Short* This is a melting ice cube. They’ve had a lot of problems and a mixed view on the street, but when you consider what is happening, they’ve really been relying on share buybacks, manufacturing earnings, nonrecurring types of earnings. They’ve had 20 straight quarters of declining revenue. This is a company that has been shrinking, and it is shrinking fast. Dividend yield of 4%. (Analysts’ price target is $166.)

This concerns him, because the debt was just downgraded. They’ve had something like 17 quarters in a row where revenues have gone down. The dividend is not in jeopardy, but with revenues and earnings going down, you can imagine that someday it will be in jeopardy.

He wouldn’t hold this. For a number of years, they did well by using cost containment. Had a lot of fat on their bones, and became leaner, but you have to look at not just the bottom line, but also revenue growth. If there is no revenue growth, but you see profit growth, that perhaps means the company is doing a good job of managing their business, but revenue is the fuel of earnings. They got so lean that they couldn’t really cut anymore fat. Revenue growth hasn’t been there for a long while.

This is so big and diversified that even if they are not successful in one area of the tech business, they have other areas. He likes the shift they are making towards artificial intelligence, towards more cloud services, and reducing emphasis on the legacy dinosaur mainframes. They are moving with the trend, but you are not having to pay up for it. One of the cheapest companies in the Tech universe, at about 12X earnings with a dividend of 3%+.

Not amazing or terrible, it’s down the middle. It is probably going to be reliable. Doesn’t think it is super exciting, but doesn’t think you are going to get burned.