IBM is beginning to look attractive. Here are the key facts:
1. It is punished by the market for a low P/E.
2. The above ignores two key facts - E goes up when shares are bought back (and IBM bought back a huge number in what should be considered a well thought out move) depressing P/E; the company is moving from low margin (27%) hardware business to high margin (87.5%) software business.
3. Buffet has an ownership of approximately 6%
4. Business quality is rated best.
5. Valuentum gives a rating of 7/10 which could quickly move higher putting it in the buy list
6. Dividend of 2.4%
I am watching but not yet buying. Not enough opportunity to hedge well yet unless you will be happy to finish the year with some 7% or so total return. Morningstar recommends a buy price of 148 which may be ridiculously low against a fair market value of 212 given by them but we could do better than the present market price. Nevertheless, the stock may have a further downside of some 3%-5% to present valuation. If it does, put writing may give some solid opportunities.
You can see some detailed analyses in:
http://seekingalpha.com/article/2229723-does-ibm-deserve-a-low-p-e?uprof=45
http://seekingalpha.com/article/2229713-dont-expect-another-earnings-per-share-target-from-ibm?uprof=45
Overall, as rightly noted in one of the pages above, it does remind one of Buffet's saying: "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because, sooner or later, one will."
I worked in AT&T when Armstrong ruined it and know that all too well. IBM is slowly getting to a point where it may become idiot proof.
