IBM Common Stock (IBM)

This has done pretty well in the last year, but that is after a five-year period of choppy performance. It has rallied out of the Trump election, and is probably not sustainable over a longer-term basis. They are a little behind the curve in terms of where technology is moving these days. It is more of a trading range stock now, and is at the higher end of its range. If it got closer to its 52 week lows, it would be a Buy again.

MSFT-Q vs. IBM-N. If she had to choose, her preference would be MSFT-Q because of their cloud business which will grow. IBM has not been able to figure out how to grow their top line. Both have cash overseas and will benefit if there is repatriation of cash policy changes.

There is lots working in large cap technology. The difficulty he has is that they are having a hard time growing. The stock is acting well and is certainly participating. He prefers Microsoft (MSFT-Q).

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.