IBM Common Stock (IBM)

80% of their business was hardware 20 years ago, and now it is 80% software. Generally constructive on this at these levels. But not out of the woods based on their missed guidance going forward. It's a question of what announcements come out and what they are working on in R&D developments. He has a “wait-and-see” approach.

There are other tech companies with good top line growth. IBM grows by buying back stock. There are a lot of better ideas in the tech world.

About 11% revenue growth, total, in 10 years. They reduced shares by 35%. So the benefit was share buy backs. There is not enough upside in his opinion.

Did very well during the recession. You are starting now to see a difference between old-tech and new-tech. IBM will benefit from a recovering global economy. If you get this at the correct price you can hold it multi-year and get growth and dividend.

Closed at $187.88 yesterday and his model price is $189.37, a .05% upside. This is a story of reducing capital out of their business, so when they report every quarter, the reports are lukewarm to the analysts. Underneath, they are buying huge quantities of their stock. That keeps their model and stock prices up. Doesn’t see tremendous upside, but also doesn’t see any big downside. Yield of 2.34%.

This is a company that has really been challenged on the revenue side for quite a while. Their hardware business is late cycle and their services business has been a little bit lumpy. They have made the most of their cost cutting initiatives, which has really driven the stock for a number of years.

Projecting to have $20 per-share earnings growth by 2015. A lot of that is coming from share buybacks. The transition from hardware to software over the past couple of decades, has been wonderful. This is more of a trader, which you can trade around a bit. If you hold it, you might be able to get a better price for it as it trades up, but if you don’t you can wait until it comes off a little bit.

Screens well. High ROE. Rising earnings and big free cash flow. However there is a lot of debt on the balance sheet. You’re not paying a lot for this company. Buying back all the stock that they can. Prefers Oracle (ORCL-N).

They are consistently criticized by the investment community, for not giving them enough guidance. This company is focused on the long-term. An incredibly powerful company. Good strong balance sheet. Exceptionally broad product category. Getting involved in new software technology.

At some point you can only ring out so many costs and at some point everything becomes mature. At this point he would not be in it and thinks growth will decelerate. They will have a tough time improving their margins.

Doesn’t think it is extremely overvalued at this point – 9 times PE ratio. It is one of those stocks that people overlook. Recent earnings did not excite investors. Doesn’t see any catalysts in the near term.

Struggled to grow their revenue base. The only reason they produced decent earning numbers is that they bought their stock back. There are good things about it, but people are staying on the sidelines, waiting for the revenue to stabilize.

Were very successful over a long period of time of growing earnings at a much faster rate than the revenue was growing. Did this through capital planning and cost cutting initiatives. They set targets and when they reached those targets there is only so much you can cut. This has reached that point. Earnings growth is now starting to match or move back to what their revenue growth is. Doesn’t think there is a lot of growth left

Has really had no revenue growth for the last number of years, but have been generating earnings per share growth because they have very smart management, but also because they have been using their cash to buy back shares. Basically it is a zero growth company, but extremely well run. Has market leadership in the number of various including IP outsourcing. Neither cheap nor expensive and he doesn’t see huge upside. They will be suffering with a strong US$.

Likes this. A fairly inexpensive way to play the enterprise computing space. Was a dramatic under performer last year and we are now seeing stocks get actually bought here. This makes complete sense and he would stick with it if you own.