IBM Common Stock (IBM)

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.

Has struggled growing its top line. Growing its EPS but the only reason it has been doing this is because it has been taking on debt to buy back shares. You can only do so much with that strategy. Has the potential to do very well but she prefers others.

A wonderful company and it got unfairly punished when its earnings came out. The market was a little too severe on them. He thinks Fair Value is somewhere in the $190-$200 range. Feels the dividend will rise over time.

Has had softer quarters recently creating lower stock prices. Have some opportunities down the road. Recently announced a significant increase to their share buybacks, which is good for the near-term in keeping the stock at a certain floor level. Concerns on shifting over to Cloud along with other competitors are giving them some challenges, but they have the capacity to handle this. Their ability to stick handle the next few quarters will be challenging but current downturn is a longer-term buying opportunity. (See Past Top Picks and Top Picks.)

(A Top Pick Nov 19/12. Down 3.19%.) Still pays a very handsome dividend and they won’t fade away into nothing like other tech companies have. This is an opportunity to pick some up while it is going through its transitional issues. He can see it trading at around $220.

Sell and buy Apple? You don’t want to put a disproportionate amount of your money in any one company because you will probably be wrong. Diversify. IBM has done well over the last 5 years and done well from a management point of view. A lot of incremental gain has been through cost cutting, and it exhausts itself at some point and so their growth is going to slow. Apple is a growth vehicle. The 5S is a big hit and margins should be good. 2014 should show new products for Apple.