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Wednesday June 17, 2009
IBM (IBM): Growth and value
In Stephen Leeb's The Complete Investor, he explains, "International Business Machines (NYSE: IBM) has plowed ahead despite a daunting economic and business environment; we are adding the stock to our Growth & Income Portfolio." "For prudent investors in this challenging economy, most of the major technology companies are financially solid, often with little or no debt and lots of cash on their books. 
"This makes them good long-term vehicles even if the economy remains off the rails for a prolonged period. "IBM’s wide array of enterprise solutions, which have remained in high demand, get Price Per Share the credit. The company offers a broad portfolio of IT services, hardware and a full suite of software solutions. "Integrating its hardware products with its software and services provides customers with high-value solutions not readily duplicated by IBM’s rivals. "The lion’s share of IBM’s revenues (57%) comes from its service business, which brings the company steady revenue, come what may in the economy. This is also true of the software segment, which represents 21% of sales but brings in 44% of gross profits. "The company is off to a good start this year: It reported better-than-expected first-quarter results, reiterated 2009 guidance and stated that it’s currently ahead of its goals for its 2010 roadmap. "From a valuation standpoint, the stock is quite attractive. Selling at 11 times expected 2009 earnings, IBM’s stock is about as cheap as it has been in our long memories. Looking out over the next several years, it’s reasonable to expect the company to grow at a 9 percent annual rate. "What’s more, IBM also has a history of enhancing shareholder value. Management has just authorized a $3 billion share buyback in addition to $3.6 billion still outstanding. "This year will mark the 15th straight year of share repurchases. Share buybacks reduce the number of shares out-standing, effectively boosting the company’s earnings per share. "Even better, IBM just increased its quarterly dividend by 10%, marking its 14th consecutive year of payout increases. The stock now carries a 2.1% yield, and the dividend is likely to keep growing." |
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"Overall, we believe quality technology stocks offer above-average growth potential and attractive valuations," says