IBM Common Stock (IBM)

Traditionally, this was more of a hardware company, but has evolved quite effectively in the last few years. They have a nice earnings momentum ramp. Valuation, although they have to grow into it a bit, looks reasonable. It’s in a space of software services where there is less capital intensity. He likes where their strategy is taking them.

(Top Pick Jun 13/16, Up 17.89%) They are moving from hardware into services. She is not expecting earnings growth until late next year. They are consistently growing in areas where she wants to see them grow. She knows there will be declines in hardware, but there is an increasing amount of revenue coming from services.

ORCL-Q Vs. IBM-N. IBM-N works hard on their balance sheet. ORCL-Q is old tech. He bought ORCL-Q at $12 a share. He likes it and it probably has the most upside. His model price is $46.11, or 0% upside, but IBM is $165.03, trading right on its model price also. He likes the diversification of both.

Not a big fan. Free cash flow growth is falling. It is all the share buybacks that is spoofing the EPS a little bit higher. They don’t have market share and they don’t have pricing power, and are trying to catch up to all the big players.

Feels their best days are behind them. What we want to do with technology right now, is find companies that are implementing technology to increase margins. The period of time when you invest in technology companies is over.

A good company, but to him it is too big. They have so many lines of business, and are trying to switch more into software as a service business as opposed to a hardware business. It has been a difficult transition for them. He would prefer other names in technology.

(A Top Pick June 13/16. Up 5.83%.) This is a long term holding. She sees them executing in a lot of their changing, going from more consulting services, cloud computing, mobile services. Has an attractive dividend yield.

(Market Call Minute.) OK, but in technology he would prefer other higher growth companies like Alphabet (GOOG-Q).

It is starting to act better, but in a long term chart it is a serial destroyer of capital. He is not a fan of share buybacks.

(Market Call Minute.) The biggest mistake you can make is buying companies in technologies that are not growing.

A tough company to like. It has come down quite a bit, but have been spending a lot of money on buying back stock, rather than investing in their business or paying out more dividends. He is not a fan of companies in love with buying back their own stock.

One of her favourites for just being a very defensive company. Also, one of the companies she views as being a turnaround. They have “Strategic Initiatives”, which means they need to get more revenue from mobile, cloud and security. They’ve been doing that, and about a 3^rd of their revenues comes from these higher growth areas, instead of the traditional PC sales. Trading at 11X forward earnings. Dividend yield of 3% and have a strong share repurchase program. Even though there are declining revenues for this year and flat for next year, looking 2-3 years out, she sees a big ramp up in this pay off of turning things around.

(Market Call Minute.) Grew by cost cutting, which is a finite process. You can grow revenues to the moon, but you can only cut costs so much. It finally caught up and the stock rolled over. There are better opportunities elsewhere.

It seems to be turning the corner. Older tech, but older tech with a little bit of promise. This is a name you could hold. It is relatively defensive with not a lot of downside. It has the potential of boosting profitability through its consulting arm.

He would like to like this one, but it does not ever come through with what it says it will. It has spent too much money buying back its shares. He does not like companies that do that.