IBM Common Stock (IBM)

Competition is the challenge. MSFT has become the darling. If you don't have an AI piece, you're left behind. Consider switching out, and take a look at MSFT or even AAPL (now that tariffs are getting resolved).

He expects a boring report next with fantastic numbers, including EPS. The Red Hat integration is working.

Has owned it in the past. When he held this at $180, the market was ignoring IBM's AI business and saw low growth. So, he bought it. IBM teamed up with Meta to enhance their Watson franchise. He made good money. Then, he started to see the PE rising into the 20s, and Accenture and other peers reported weak results. So, he exited and wouldn't re-enter.

She bought it when it was trading at 12x PE and yielded over 5%. Diversifying away from mainframe computers to cloud and AI will raise growth in the future. 

Is a quantum computing play, Watson AI is a tailwind and Red Hat is monetizing as well as leading in AI.

Is up 71% since he added it a year ago. Has become more fully valued at 25x PE. Still a great business with modest revenue growth and margin expansion. They benefit from the transition from a consulting business to an software, AI-led. They are emerging as a leading quantum computing play.

This is the next phase. We've been in this AI growth patch for a while now, which won't end, but quantum is the next level. It answers a lot of the problems that we deal with in the world such as medical issues and cybersecurity.

Problem is, not a lot of developed companies in the space. The industry is quite immature, but sometimes (if you have a longer time horizon) that's where you find opportunities for decent, long-term growth. Unlike AI, quantum needs a lot of space (perhaps it could solve office realty issues). IBM is starting to look more prominent in that space.

Good part is that it's part of quantitative computing, and this is where the stock can rally in the next 5-10 years. Doesn't feel it can put enough money in to become one of the leaders in that area. That's why he owns MSFT.

It sank 6.6% right after earnings. The market got it wrong--this is a buy opportunity. After a lost decade, they returned to growth a few years ago. They spun off their legacy business and doubled-down on their Red Hat division, essential for AI. Rallied 34% last year, and held up even when AI corrected. YOY revenue was +2%, software +7%, consulting -2% and infrastructure -6%. Bountiful cash flow, though. Also, the reiterated full-year guidance. The quarter and business are good.

Between hardware and software, higher margins and greater growth still belong to the software side. He's looking more to consulting, with its higher margins.

Legacy tech giants like this have been some of the top names this year and are a good place to hide. They boast strong earnings, reasonable valuations and good growth in AI.

It wasn't seen as an AI play until their partnership with Microsoft. Shares then rallied. He sold around $235 after the PE jumped as its value dropped. 

He added it last May, and up 51% since. Today's more fully valued at 23x. Remains a long-term hold, given their AI consulting.

Bought on promise of its AI partnerships. Moved up steadily, but he worried that legacy businesses were lagging. He sold when valuations got into low 20s. Have to know when to buy, and when to sell.