Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Why Investors Should Avoid IBM

Companies / Tech Stocks Apr 29, 2015 - 12:47 PM GMT

By: Money_Morning


Michael A. Robinson writes: Over the last two years we’ve talked many times about how to make money on high-tech stocks.

Nearly all of our talks have focused on finding winners that offer a lot of upside. As I’ve been telling you, the road to wealth is paved by tech.

But that doesn’t mean you can blindly invest in just any tech stock. To ensure that you make money in the long run, you must avoid losses in the short run.

Today, I’m going to show you how to protect your portfolio’s value by dodging stocks with loser written all over them.

Specifically, I want to talk with you about a mega-cap tech firm that you need to steer clear from.

In fact, this firm violates a key rule of my five-part wealth-building strategy…

Big Black and Blue

I have read numerous stories about the turnaround underway at International Business Machines Corp. (NYSE: IBM) over the last several years.

There was another spate of positive stories last week after IBM reported first-quarter results that beat Wall Street’s earnings estimates.

While I’m glad to see the company making progress, I still see a lot of problems ahead. After all, the first quarter also was the 12th consecutive one in which IBM suffered an annual sales decline.

Even if IBM is able to lower overhead and boost earnings per share, that’s still not a recipe for long-term success. See, there’s an old saying in turnaround investing…

“You can’t cut your way to growth.”
I know this area well, having served as a strategic advisor to a turnaround investment banker. I’ve seen firsthand just how much money you can make on turnarounds – if you pick the right one.

IBM is not the right one.

Virginia Rometty has spent her entire three years as IBM’s CEO trying to right a listing ship.

And she has made some good decisions, like getting IBM to focus more on Big Data. That’s a new field that involves using massive computing power to comb through mountains of raw data to find key patterns, such as spotting online fraud among billions of e-commerce transactions or improving efficiencies at warehouses and factories.

Rometty also has steered IBM more toward cloud computing, a trend in which vendors host data and applications for their clients at remote server “farms” and deliver it all over the Web.

But over the past two years, these moves have not paid off for IBM’s investors. Even after IBM rallied on a first-quarter win, the stock is still down 11% during those past two years.

That decline is even worse that it appears. During that same period, the Standard & Poor’s 500 Index gained 33.5%.

And the comparison with the S&P is being kind to IBM.

Had you focused on just a few of the high-tech winners I’ve brought to you here at Strategic Tech Investor, you would have crushed the overall market’s returns.

Just look at video-processing chipmaker Ambarella Inc. (Nasdaq: AMBA), which I first recommended in August 2013 – and a member of our Million Dollar Tech Portfolio. Over the past two years, it has advanced 437%, or 13 times more than the broader market.

For those of you who prefer the safety and liquidity of big-cap firms, compare IBM to Apple Inc. (Nasdaq: AAPL). In the past two years, the iDevice King, which I brought to you in October 2013, has advanced 120%.

The Rule Breaker

IBM’s subpar performance over the past few years stems from the fact that it violates Rule No. 1 of Your Tech Wealth Blueprint – “Great companies have great operations.”

And those great operations almost always starts with leadership. Based on the track record I’ve seen to date, Rometty clearly is not the right CEO to return IBM to its glory days as a true innovator.

In no small measure, that’s because she’s spent her entire career at Big Blue.

In my experience with turnarounds, it’s rare to see a “lifer” get a big firm like IBM back on track. That’s because up-from-within executives grew up in a culture that is a big part of the problem in the first place.

Usually, a senior internal leader lacks the kind of outsider’s perspective needed to turn a laggard back into a leader.

To be fair, some areas where the embattled leader is making progress.

The Wall Street Journal recently ran a long analysis about Rometty’s tenure, which noted that she has spent about $8 billion over the past three years buying about 30 companies in her targeted growth markets.

On paper, it looks like she’s making progress.

For instance, Big Data, cloud computing, cybersecurity, social networking and mobile technologies made up 27% of IBM’s sales last year, compared with 15% the year before Rometty became CEO.

But as the sales mix has definitely improved, the overall revenue outlook looks bleak. During Rometty’s tenure, she has yet to deliver a single quarter in which overall sales improved from the year before.

And yes, she has gotten a vote of confidence from famed investor Warren Buffett. His Berkshire Hathaway Inc. (NYSE: BRK.B) is IBM’s largest shareholder and just increased its holdings from 6.3% of shares outstanding to 7.8%.

But I believe Buffett’s IBM involvement points up two key questions every tech investor should consider before taking a chance on this stock: What share price makes sense, and what is the appropriate time horizon?

Given IBM’s weak sales picture and market-lagging performance, I would only consider buying at what I call a “stupid cheap price,” one so low that you can afford to take a flyer.

I wouldn’t pay more than $150 a share, a 14% discount from today’s opening price… and then only if I could afford to hold it for many years, such as in a retirement account.

After all, I’ve clearly demonstrated that IBM isn’t a true growth stock. It’s not even a good foundational play that you can count on to give your portfolio solid support.

And it’s not really a great special situation play, either.

In other words, until the situation with IBM dramatically improves, I suggest you avoid this stock and focus on tech winners that offer a lot more potential upside.

I’ll be telling you more about those kinds of tech stocks in the days ahead.

P.S. I hope all are “Liking” and “Following” me at Facebook and Twitter. We’ve got a great community of friends, colleagues and readers there who are eager to make big money in tech stocks today.

Source :

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules