Think IBM: Think Big Blue, think big profits

Posted Jul 15th 2009 5:00PM by Joseph Lazzaro
Filed under: International Business Machines (IBM), Stocks to Buy

'm Reiterating my Buy rating for International Business Machines Corp. (NYSE: IBM) first recommended on February 18 2009 at a price of $91.51.

IBM remains well-positioned to increase market share in key emerging markets, once global growth resumes. Big Blue also has done a better-than-average job cutting costs in developed markets, and its services unit will likely continue to exceed revenue expectations, assuming Q1 growth in long-term service contract signings is indicative. The FY2009/FY2010 EPS estimates for IBM are $9.13 to $10.02.

And, of course, IBM's vast resources and attractive geographic footprint (U.S. 42% of revenue; Europe, 35%, Asia 20%, other 3%) adds to the positive story.

Technically, IBM's chart looks strong, so if you missed the initial $91 entry point, don't worry: Big Blue's shares are headed north, assuming a global economic recovery.

Stock Analysis: IBM is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in IBMG now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your IBM position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $62.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: computers, ibm